Columbus Dispatch: Reverse Mortgage Product Fits Important Niche

Growing need for reverse mortgages may be tempered by new rules limiting the loan’s use, reports the Columbus Dispatch, but the loan fits an important niche for an aging population that hasn’t saved enough for retirement. 

“Just as the appetite for reverse mortgages is growing, new rules are clamping down on the loans,” says the article. “…The regulations are coming into play just as more senior citizens are turning to the loans. Borrowers took out $15.3 billion in reverse mortgages in 2013, an increase of 20.6 percent from 2012, according to the industry publication Inside Mortgage Finance.”

Changes to the federal reverse mortgage program include limiting the amount of proceeds borrowers can access in the first year of the loan. Also en route are underwriting guidelines for lenders that will consider credit, debt-to-income, and cash-reserve levels. 

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All told, the rules are “overdue,” according to industry experts cited in the article. 

“I think it’s a really good thing,” Stephanie Moulton, an assistant professor at the John Glenn School of Public Affairs at Ohio State University, told the Dispatch. “Lenders knew something like this is needed.”

That the changes were needed was evidenced by the Federal Housing Administration requiring its first-ever bailout after its insurance fund lost about $5 billion, attributed to losses in the HECM program, the article continues. 

But Moulton, who’s leading a reverse mortgage study of 30,000 homeowners who applied for the loans, doesn’t think the problems associated with reverse mortgages are inherent in the product.

“The horror stories are not the norm,” she told the Dispatch. “The product fits a niche, an important niche, especially as baby boomers retire and don’t have enough savings in retirement. It’s a way for retirees to access equity in their home in a safe manner.”

Read the full article in the Columbus Dispatch. 

Written by Alyssa Gerace

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