Reverse Mortgages May be Excluded from ‘Rapid’ Home Loan Expansion

Access to home loans now is approaching pre-recession levels as mortgage lenders rapidly loosen requirements, although reverse mortgage lenders continue to be limited by government regulation, a top researcher at real estate website Zillow tells RMD.

Zillow on Friday released the first-ever Zillow Mortgage Access Index (ZMAI), showing the notable trend toward loosening credit. The index weighs seven variables, including the lowest 10th percentile of mortgage borrower credit scores and the percentage of non-conforming loans, and comprises data going back to 2002.

“While we aren’t directly taking reserve mortgages into account, the increased availability of mortgage credit more generally can be good news for reverse mortgage availability as well,” states Svenja Gudell, Zillow’s senior director of economic research, in an email to RMD.

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However, Gudell notes that government regulations in the reverse mortgage market may “swamp out” the effects of more accessible credit.

Credit significantly tightened after the housing and financial collapse of 2007, but now access to mortgage credit has bounced back and is two-thirds of the way to 2002 levels, the Zillow index shows.

The trend of steadily loosening access to mortgage credit began in 2013, and no slow-down appears imminent, according to Zillow.

“The reality of what borrowers are experiencing in the mortgage market does not match the popular narrative,” stated Stan Humphries, Zillow’s chief economist, in a press release. “Lenders are, in fact, opening their doors a bit wider, especially for borrowers with credit scores below 700.”

Current mortgage access makes sense at this stage of the housing cycle, and credit is “a long way” from being too easy for homebuyers to attain, Humphries stated. Still, he said caution is called for, considering the role that credit standards played in the financial crisis.

Going forward, Zillow will release the ZMAI on a quarterly basis.

Written by Tim Mullaney

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  • FHA and Fannie Mae have imposed onerous waiting periods of up to 4 years on seniors who have settled their previous FHA guaranteed reverse mortgage with either a short sale, deed in lieu, foreclosure or bankruptcy.
    Some waiting periods are even longer or are permanent since some waiting period do not even BEGIN until the lender has been paid for its loss claim on the loan. If the lender doesn’t file a claim, then the senior is effectively barred from the FHA loan program forever.
    I guess its not enough to lose most or all of your equity and have your credit damaged settling your previous reverse mortgage. FHA needs to pile on even more.

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