A Reverse Mortgage Divide Grows As Borrower Motives Change

As financial planners and scholars increasingly advise certain borrowers to take out Home Equity Conversion Mortgages as early as possible as part of their retirement plans, some loan originators are noticing increased interest for the products from younger borrowers. At the same time, many in the industry are working to adapt their strategies to target individual age subsets of the consumer marketplace for home equity conversion marketplace, each with their own set of concerns. 

Laurie MacNaughton, a reverse mortgage specialist at Southern Trust Mortgage in northern Virginia, says an age gap has become more and more apparent in her business as financial advisors increasingly recommend HECM loans for younger borrowers as a retirement-planning option, while elder law attorneys continue to refer clients in their 80s who may applying to meet immediate financial needs.

But for those who didn’t explore HECMs as an option in their early 60s, there may not be a sense of urgency, MacNaughton said — especially as people in their 70s remain active longer and may not think they’ll run into financial issues in the future.


“In the ‘60s, [people in their] 60s were the old people, but now they’re still working and running marathons — it’s kind of an Indian summer,” MacNaughton said, noting that in her home region of the Washington, D.C. suburbs, many who work in government and politics remain on the job as consultants or contractors into their mid-70s. She terms consumers in their 70s the “silent generation” for HECM borrowers — not to be confused with actual Silent Generation, a term for people who were born between 1925 and 1945.

National data from the Department of Housing and Urban Development doesn’t quite back up MacNaughton’s anecdotal observation around the nation’s capital: Borrowers aged 70 to 79 accounted for 39.3% of all HECM loans in fiscal 2016, up from 37.1% in fiscal 2015.

But the age gap in MacNaughton’s practice made sense to Mike Gruley, who highlighted the different approaches he generally uses when reaching out to baby-boom borrowers and older potential clients. Gruley, an executive vice president of reverse mortgage lending at 1st Nations Reverse Mortgage in Ann Arbor, Mich., says people in their 80s tend to be far more suspicious of credit in general, having been raised in a generation where mortgages and other loans were seen as burdens that needed to be retired as quickly as possible.

“We don’t hear about many baby boomers having mortgage-burning parties,” Gruley says, noting that people in their 60s have fewer qualms about using home equity to both cover necessary expenses and pay for indulgences such as vacations and second homes.

As a result, Gruley doesn’t usually take the home-equity approach when working with older borrowers, instead focusing on the practical benefits of securing additional funds to help pay bills and other necessities.

“We don’t need a second house,” he said, summarizing their attitudes. “This one just got paid for.”

Written by Alex Spanko

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  • Let us be clear, Baby Boomers have already started turning 71. There is a huge difference between the Silent Generation and Baby Boomers but the end of the Silent Generation and the start of Baby Booms are now in the 70-74 age range. Only Baby Boomers are in the 62 year old to 70 year old range.

    The HUD released data for the month of December 2016 through its HECM Snapshot Report is that the average age of the youngest borrower in that period was 74 years old based on the total initial principal limits divided by the related total maximum claim amount.

    The anecdotal nonsense about younger borrowers started with a MetLife Mature Market Institute (“MMMI”) study in association with NCOA. NCOA started believing the nonsense produced by its FIT database used in HECM counseling. Its findings that borrowers were getting younger was and remains nonsense. This time jointly MMMI and NCOA were starting a myth that has not had an easy death.

    For years the average age of the youngest borrower was gone progressively down from 78 in the initial year of endorsements to 72 but the myth has endured. The problem was the study dated March 2012 was focused on 62 years old as if we were in the midst of a huge unexpected drop in the average age of the youngest HECM borrower which again was and remains false to this day. The discredited study is located at:


    Even NRMLA started spreading the myth. No one in this myth spreading mill seemed to understand that consumer advocates would jump on this very false conclusion predicting that there was real danger if seniors started taking HECMs too young.

    Yes, it is believable that among financial planning clients age 62 to 70, more are beginning to investigate and originate HECMs as a means to secure their financial future. Yet they have had NO meaningful influence on the average age of the youngest borrower and they have had absolutely no significant positive impact on overall reverse mortgage endorsements from the day that the first Baby Boomer turned 62 on 1/1/2008 (which is getting much closer to a decade ago NOW). With less than 10 months to go to reach a decade, it is doubtful if Baby Boomers will have much positive impact on endorsements by even 1/1/2021.

    By 1/1/2021, there will be about 47 million Baby Boomers over the age 62. Will even 470,000 of Baby Boomers (1%) have performing HECMs as of 1/1/2021? Very, very doubtful. While that prediction may be railed on and called negative, it is also very, very realistic based on how our endorsement numbers are still in a downward sloping secular stagnating (or worse) trend despite claims made four years ago of annual total endorsements of hundreds of thousands in the last part of this decade.

    Reality can be a cruel master, especially in this industry.

      • REVGUYJIM,

        Thanks for waking me up. I was just California dreamin’ that fiscal 2017 had 250,000 endorsements with over 75,000 coming from H4P.

        That was wild!

    • John,

      Let us see how endorsement growth goes. Methods are methods and the very best method if used by a good originator could result in that person becoming far less effective.

      Mike’s method may work for you, Mike and many others but it should not be used to the exclusion of all others.

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