While the number of reverse mortgage loans originated annually has fallen starkly following the housing crash, those invested in—and who observe—the business itself are not sounding alarm bells, writes a report from mortgage industry publication Mortgage Orb this week.
With input from originators, academics and the National Reverse Mortgage Lenders Association, the article concludes the market is getting ready for a comeback.
Recent changes position the market for recovery, Delores Conway, associate dean and professor of real estate at the Simon School at the University of Rochester, told Mortgage Orb, of the recent suspension of the fixed rate full draw reverse mortgage in favor of the adjustable rate and Saver products.
“It will help to strengthen the program in the long term,” she said. “The banking industry is still undergoing change from the financial crisis, so we are still working through all of that.”
The product’s details and a lack of understanding have not made borrowers any more prone to taking them, Bentley University professor Steve Weisman told the publication.
“Reverse mortgages are difficult for consumers to understand, and misleading advertising has led to poor consumer choices,” he said, adding, “The withdrawal of larger players is leaving the market dominated by small originators who may not be up to the task of dealing with changing economic conditions and changing regulations.”
The recent changes also stand to improve the market’s response to reverse mortgages, Weisman said.
“Many purchasers of reverse mortgages unwisely got the large lump sums provided by the fixed-rate HECM and misused the funds, leaving them in a precarious position as they became older,” he told Mortgage Orb.
Written by Elizabeth Ecker