A Columbia Business School professor is so convinced of reverse mortgages’ role in responsible retirement planning that he has entered his company into the industry, reports Bloomberg Businessweek.
Prof. Christopher Mayer, 48, a recently-elected board member to the National Reverse Mortgage Lenders Association is lightening his course load at Columbia as he adds reverse mortgage lending to his business, Longbridge Financial, where he is co-partner and CEO after previously serving as chief credit officer.
“It’s an enormous underserved market,” Mayer told Bloomberg. “You have $3 trillion in housing wealth among older Americans. You have large institutions exiting the market, and more and more elderly with housing debt coming out of the crisis as well as other kinds of debt.”
Longbridge was founded two years ago by former executives of New York Life Insurance Co. and Fidelity Investments, Bloomberg reports, and it’s entering the reverse mortgage industry even as origination volume has dropped. In 2009, more than 100,000 loans were originated compared to 60,000 in 2013, the decline due in part to the exits of Wells Fargo and Bank of America.
Tweaks made to the federal Home Equity Conversion Mortgage (HECM) program limiting up-front spending can help make sure borrowers won’t outlive their assets, Mayer says.
“Those changes all make this a much more attractive business and the product is a better product,” he said in the article.
Mayer has been writing academic papers advocating “properly structured reverse mortgages” as a strategy for reducing poverty among seniors since the early 1990s, reports Bloomberg.
Another academic is involved in the professor’s company: Economist Alicia Munnell, the director of the Center for Retirement Research at Boston College, who has written numerous articles on the growing need to use reverse mortgages as a retirement tool. Munnell is an investor and board member for Longbridge, says Bloomberg.
“In the past, people have not generally wanted to touch their home equity,” Munnell told Bloomberg. “I don’t think that’s a pattern that’s going to be affordable going forward.”
Read the full article at Bloomberg Businessweek.
Written by Alyssa Gerace