Time: Reverse Mortgages Fast Entering Mainstream

Formerly a loan of last resort, today’s baby boomers are fast turning to reverse mortgages to pay off debt and improve quality of life writes Time online, citing a recent study released by MetLife and the National Council on Aging. The shift, though “somewhat alarming,” can be attributed to several factors, Time says.

“Boomers have always thought differently about their homes and debt,” Time writes. “They moved and remodeled, and they borrowed like no generation in history. Popularizing the reverse mortgage, maligned in the past for high fees and high risks, seems a natural evolution. The good news is that reverse mortgages are now far more consumer friendly, though they are not for everyone.”

Time cites the data in MetLife’s Mature Market Institute study, released last week, indicating that boomers who are in the 62 to 64-year old age group now comprise more than 20% of borrowers today. Acceptance of debt is part of the shift, along with a need for income alternatives, MetLife said.

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“Still, the growing interest in reverse mortgages among homeowners under 70 is somewhat alarming,” Time writes. “Age plays a big role in how much money you can get from a reverse mortgage. That’s because the amount is determined by your remaining life expectancy. At today’s rates, a 65-year-old with a $250,000 home that’s free and clear could choose a lump sum or line of credit of $103,000, or monthly payments of $687 for as long as they live in the house. An 85-year-old in the same situation could get $141,000 in cash or a credit line, or nearly double the monthly income.”

Though there are other alternatives for income retirement, the article concludes, “this is a decent option—and you’ll have lots of company.”

Read the Time article.

Written by Elizabeth Ecker

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  • The Times story has as much relevance to the situation in the industry as an article describing how the housing industry is now on an upswing. It just is not true.

    The facts are 1) reverse mortgage endorsements are at the lowest numbers they have been in years, 2) case number assignments are heading the wrong direction, 3) the pull through rate is at an all time low, 4) the trend toward average age younger borrowers is generally following the average age pattern for the national senior population as a whole, 5) the average appraised values of homes being endorsed over the last two fiscal years is going down by over 11%, 6) Saver endorsements for this fiscal year as a percentage of total endorsements is not significantly rising, and 7) the MLMMI and NCOA March 2012 study was not all that positive about HECMs being used for anything other than loans of last resort.  So even when the mainstream press is making positive statements about reverse mortgages, it is largely based on faulty information.

    So at least as to how it applies to the press: “Perception is truly everything.”

  • aliasBob,

    The facts are more Boomers turned 62 last week than the most probable outlook for HECM production for this fiscal year.  I do NOT believe that our current production level is in any way, shape, or form “high tide” for this industry from this point forward.  We are at “low tide” right now but the key questions should be 1) how much lower will we go and 2) when will the tide rise?  I am no prognosticator, just a realist.  So far the optimists in our industry have no real answers just incredibly bad predictions.

    Are you saying that the positions of these two CFPs are not positive or should not be looked on with some degree of hope of changing attitudes of influential financial business leaders who have traditionally looked at our products as loans of last resort?  Right now my personal concern is more with the outlook of MLMMI and NCOA more than the outlook of CFPs.  Like Mr. John Lunde once predicted, 50% of our production should be in Savers (i.e., if we are going to successfully reach out to the more affluent senior community); this is one way our industry can grow in the midst of this storm.  

    Our industry has done so far this fiscal year what was hoped last summer.  Several of us anticipated that the industry would keep 50% of the volume that Wells and B of A once did.  We did not want to see anything greater than a 50% permanent loss in their production.  That is close to the numbers we are seeing.

    Mr. Lunde has found some silver lining in production for January 2012.  His business analyzes the market and his insights this month are surprising.

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