Reuters: Reverse Market is Mortgage Growth Spot

Baby boomers are sparking a reverse mortgage revival as a way to generate retirement income, reports Reuters.

After the housing boom-and-bust, the reverse mortgage product was “left for dead,” the article says, but retirees who haven’t saved enough are now turning to their largest asset: their home.

“Brokers and bankers say the 77 million retiring baby boomers will likely help fuel further growth in the loans in the coming years, making the business a growth spot in a home loan market where volumes have recently been declining,” says Reuters.

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In 2013, reverse mortgage borrowers took out $15.3 billion of loans, up 20% from the previous year, according to Inside Mortgage Finance data cited in the article. 

While reverse mortgage dollar volume recently climbed, traditional mortgage lending is expected to fall 37% this year as higher interest rates reduce refinancing activity, the Mortgage Bankers Association forecasts.

“There are lots of mortgage lenders who see declining volumes and may view (reverse mortgages) as an opportunity to increase revenues,” David Stevens, president of the MBA and a former commissioner of the FHA, told Reuters.

Larger lenders including Wells Fargo and Bank of America exited the reverse mortgage industry in recent years, but smaller lenders see opportunity for growth in the space. 

“The market is huge. It’s under-penetrated,” Denmar Dixon, chief investment officer at Walter Investment Management (NYSE:WAC), said at a December investor conference.

About 10,000 boomers turn 65 each day, and almost half (48%) don’t think they’ll be able to cover all their expenses in retirement, according to a  Fidelity survey. 

With bigger lenders concerned about the risks of reverse mortgages, citing factors such as unpredictable home values and the loan’s delinquency rate, the Federal Housing Administration has instituted changes to the HECM program addressing those risks, Reuters notes.

“As with any mortgage product, there is risk to financing a loan, but we have made, and continue to make, significant efforts to mitigate that risk,” Melanie Roussell, a spokeswoman for U.S. Department of Housing and Urban Development, told Reuters.

Read the full article.

Written by Alyssa Gerace

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      • Bob,

        You mean the group which cannot find any markets to target but those in California (12) and 8 others? Is that who you are talking about?

        Remember the adage about not putting all of your eggs into one basket? This seems like too high of a concentration in California. Yes, California is generally countercyclical and also a great place historically when it comes to home appreciation but 12 of 20 markets including Napa of all places, really?

      • Cynic,
        My comment was very “tongue in cheek” , “sarcastic”, or should we say very Cynical!! The same people who have been marketing this product for the last 10 years are the same people who are “marching us to the Summitt”, and look at the fantastic job they’ve done so far…here it is 10 years later and people still have the same questions, same issues, and the same false assumptions. I can’t wait to see how much progress they make in the next 10 years!!!!

      • Bob,

        I am not so sure your reply is as pessimistic as it is cynical. A cynic is someone who questions others’ motives. A pessimist is someone who does not have a positive outlook generally or on specific issues.

        I strongly believe that industry leaders have been so overly focused on gaining the market share of the largest lenders leaving the industry (picking the low lying fruit) over the last few years that they ignored the issue of industry growth and so it shrank and continues to shrink except for the impact of the pull forward effect of terminating all Standards last fiscal year.

        What is scary about their Extreme Summit is that it is so overly focused on the lower two-thirds of coastal California. Will that focus so deplete interest in HECMs in that segment of the country that originations will be fewer and farther in between after this campaign than before? How sustainable is this approach as to maintaining the annual rate of origination achieved during the campaign in the years following it?

        It is sad that so few lenders are recruiting and training staff with the kinds of backgrounds we need to reach the financial planners and other financial advisors. In the last few months I have gone back into industry publication archives and read the articles and other information on reaching out to those planners and advisors. The only difference between then and now is that we have some support from that community. So the new question is will that support be sufficient to experience a significantly higher number of endorsements from that referral source? While it is great to experience less rejection from this community that is not the same as significant endorsement growth from this source.

        So in closing, I hope I never become a pessimist but maintain a healthy skeptical, realistic, and positive outlook while never fully trusting the motives of others.

      • Cynic, a pessimist I am not. I have been continually putting one foot in front of the other and marching up that summit. For the last 3 years 100% of my business comes from those in the financial industry, past clients, and Attys. I know first hand what it takes to open those doors and REALISTICALLY, this industry talks a good game but does not walk the walk. Why after 8 years in this industry am I still answering the same questions concerning “reverse mortgage myths”? To me the answer lies in the marketing dept. of all lenders and with NRMLA. They quite simply have not performed and they have not delivered the message. Instead they have focused on the “low hanging fruit” and continue to advertise this product like a used car commercial. So am I a pessimist? No. Am I realistic? Yes. Until this industry gets it head out of the sand, that summit continues to get higher and higher

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