While not actively marketed by the majority of reverse mortgage lenders, the tenure payment offered as one Home Equity Conversion Mortgage option can serve as a possible solution to retirees facing cash flow hardships, U.S. News reports.
“The prospect is attractive because most surveys project baby boomers will face serious financial shortfalls in their retirement years,” U.S. News writes. “Accessing home equity in a safe and predictable way is often held out as one of the few ways consumers can add additional income in their retirement years.
The tenure payment option is not often taken, the article notes, with only 2% of more than 600,000 active federally-insured reverse mortgages involving “pure tenure payments,” a HECM spokesman told U.S. News.
Yet one new lender, Longbridge Financial has made it a focal point. The New Jersey-based startup believes these payment options can help borrowers move to a more financially stable position, according to the article.
“I just believe that [a reverse mortgage] has a place in solving the retirement problem in this country,” Longbridge CEO Michael Gordon told U.S. News.
A tenure payment under a reverse mortgage, he said, can enable borrowers to swap an asset such as their home for a “more balanced portfolio and income stream.”
The current low-rate environment has made the government’s payout rules on tenure payments “more than competitive,” as they are based on statistical likelihoods that homeowners will either die, become too ill to stay in their homes or decide to move out.
“The way the government has structured the product, loan originators tend to be only interested in transaction volume,” John Sinclair, Longbridge chairman told U.S. News. “We look at the world a little differently.”
Written by Jason Oliva