Local Spotlight: Reverse Mortgages in Southern California

It’s no secret that the reverse mortgage industry took a hit after the U.S. Department of Housing and Urban Development implemented HECM program changes in October 2017.

But with lenders finally adjusting to the new normal, many markets are ready for a comeback. And there’s no market more ready than Southern California, some originators based there say.

Regional Stats:

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  • Total Population: 23.8 million (as of 2016)
  • Senior Population (Ages 65 and up): Approximately 3.3 million (based on percentage of total population [14%])
  • Average Home Value: $546,100 (Zillow)
  • Home Price Appreciation: 7% in 2018 vs. 2017 (LA Times)

“This year, we were very reactive because of all the changes,” says Colleen Moore, CRMP, national director of the Land Home Reverse Mortgage Division for Land Home Financial Services, Inc., in Concord, California. “But we’re expecting lots of growth next year. I’m really excited to be in the industry now.”

There are several factors that make Southern California a promising market relative to other markets across the country, says Christina Harmes, CRMP, assistant national director and reverse mortgage specialist for C2 Reverse Mortgage in San Diego.

First, California was among the first states to approve new proprietary products.

“We now have so many options to help our clients meet their goals,” Harmes says.

Second, because home values are so high in Southern California – the six-county region had a median home price of $530,000 in July – most homeowners are more comfortable with debt.

“Californians joke about the ‘sunshine tax,’ meaning we pay more to live here,” Harmes says. “But they also want to live well in retirement and are willing to pay for it.”

And third, many homeowners look at their homes as investments, rather than something that will be passed down to future generations.

“It’s almost unheard of here for anyone under 75 to own their home free and clear,” Harmes says. “People are used to buying homes with financing, having a mortgage and refinancing. They see their homes as an investment, not just a residence.”

Because property tends to be more expensive in Southern California, many residents are working long after they turn 62, according to Moore. And with that comes a different type of client.

“When you work longer, you have a totally different mindset than when you retire,” she says. “So there’s a level of sophistication and financial education with a lot of my clients.”

It’s not all sunshine in SoCal, however. One challenge originators face is an oversaturated market: More HECM loans have been originated in California (16,000+) than in the next two states, Texas and Florida, combined, and there’s no shortage of lenders vying for seniors’ business.

“I’m not afraid of competition,” Moore says. “It’s going to be a dynamite year.”

Written by Meredith Landry