NYT: Older Americans More Open to Mortgage Debt, Despite Obstacles

Reverse mortgage professionals have long grappled with homeowners’ later-in-life resistance to assuming more debt. After all, many homeowners aged 62 or older have spent a good chunk of their adult lives attempting to rid themselves of the purchase mortgage that allowed them to buy their family homesteads.

But those attitudes are changing, and the New York Times on Sunday explored the new, innovative ways older Americans are using credit to buy houses — and how they’re using the cash they save to fund home repairs, pay down debts, and cover other costs.

The common trajectory for homeowners went something like this: Make a modest down payment, pay down your mortgage over the course of 30 years, throw a party when you finally owned the house free and clear, and never go back into mortgage debt. While that attitude remains entrenched in some older potential Home Equity Conversion Mortgage borrowers — as reverse mortgage professional Mike Gruley told RMD a few months ago — the stigma against mortgages in one’s retirement has gradually lifted.

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Back in 1992, the Times points out, just 18.5% of households headed by people aged 65 to 74 had any kind of home-related debt, according to the Federal Reserve. That number steadily rose to 32% by 2004 and 42% in 2013, with the Times estimating further future growth as the baby boom generation continues to age.

To get a fix on the motives of today’s older mortgage borrower, the paper spoke with a variety of buyers, including a couple from Connecticut who used a 30-year mortgage to purchase a condo — despite being in their early 70s.

“We could have paid cash for the place, but our financial adviser suggested that we get a mortgage so we can get a tax deduction, and our money keeps working for us,” buyer Chuck Queener told the Times.

The Hunts, also in their early 70s and retired, used a 30-year fixed mortgage to purchase a homestead in their native Kansas, where they plan to spend the remainder of their retirement. While they could have paid cash, they decided to put just 20% down and use the proceeds from the sale of their previous home in California to pay other debts and spruce up their new digs.

Despite the coverage of seniors’ willingness to assume mortgage debt, the piece only mentions reverse mortgages in passing — specifically, the HECM for Purchase product, which the Times says could help retirees buy second homes. But perhaps HECM lenders and originators could find promise in the secondary thesis of the Times piece: Getting a traditional “forward” mortgage is harder than it ever was in the wake of the Great Recession and the Dodd-Frank financial reforms, even for younger people with steady income streams. 

Queener, for instance, told the Times that banks today look “at every penny you got coming in.”

“It was a strenuous process,” he told the paper. “Every time we turned around, there was more paperwork to fill out.”

The Times also spoke with Greg McBride, chief financial analyst at Bankrate, who advocated for mortgages as a way for older people to remain in the credit landscape — but, in doing so, identified the problems that many might encounter when attempting to take one out.

“Poor credit, no credit, or lack of verifiable income — all a big problem,” McBride told the Times.

Read the full piece at the New York Times.

Written by Alex Spanko

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  • “…as reverse mortgage professional Mike Gruley told RMD a few months ago — the stigma against mortgages in one’s retirement has gradually lifted.”

    This quotation is little more than the anecdotal conclusion of an ultra optimist. There is no need to guess about these issues. We see the real dynamics in case number assignments and endorsements. Ultra optimists need to learn that their helpful predictions in 2010 and later have produced nothing but disappointment, discouragement, and pessimism in their wake for those who put much trust in the predictions of these industry leaders. All it shows is that they do not know what they were talking about.

    Today some growth is being seen but not so sufficient that prognosticators can say with any degree of confidence that the industry is now out of its current period of stagnation. The reason is our current period of stagnation has gone from a low of about 48,900 endorsements (fiscal 2016) to a high of about 60,100 (fiscal 2013). Eight months into this fiscal year with a total number of endorsements of just 36,700 and a modest number of case number assignments which will turn into endorsements over the next two months, there is little chance that endorsements will reach 56,000 endorsements for fiscal 2017, the expected endorsement total based on the irregular shaped downward slopping M pattern the industry has experienced over the prior four years. By May 31, 2017, the industry had received all but a handful of applications with case numbers assigned that will be endorsed before October 1, 2017, the day that fiscal year 2018 begins.

    Mike had absolutely nothing empirical supporting his statement earlier in the year and nothing empirical today that supports his subjective conclusion. In fact what endorsements are showing is that seniors are more turned off to HECMs than they were in the other up legs of this period of stagnation.

    But there is no room for gloom or doom. What the industry is finding is a general rejection of financial assessment as that term is used in our industry. When someone is telling you that the industry is finding this or that, just take a look at the numbers to see if their point is backed up.

    One supporter of H4Ps (a different Mike) gets so mad at one prognosticator that he despairs that the numbers are not telling the “real story.” Over five years later, the numbers did tell the REAL story. The future finds its roots in the facts of the past.

    It is time to move forward in light of the fact we are not yet out of endorsement stagnation and that the fiscal 2018 endorsement picture is still unknown with little reason to anticipate an endorsement total of less than 47,000 or greater than 60,100.

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