Local Spotlight: Reverse Mortgages in Florida

Florida remains the retiree capital of the United States. No personal income tax, warm weather and plenty of sunshine drew nearly 78,000 retirees to the state in 2015 alone, according to the most recent U.S. Census migration data. That’s 50,000 more retirees than Arizona, the second state on the list.

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Like most of the country, Florida originators took a hit after the October 2017 changes to principal limit factors (PLFs) handed down by the Department of Housing and Urban Development (HUD). But all of these incoming Baby Boomers could help to reinvigorate the local reverse mortgage industry, says Mike Peerless, reverse mortgage director for Holland Mortgage Services, Inc., in Ormond Beach, Fla.

“I think this may help stem the tide,” Peerless says. “I am not saying that the immediate outlook looks rosy, quite the contrary, but at least the source of qualified seniors is still flowing into the state.”

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To potentially improve his closing rate, Peerless will soon begin teaching continuing education classes to real estate professionals.

“We will offer the classes at no charge as we want to partner up with these professionals to make 2019 a good year for the both of us and for our clients,” he says.

The challenge with many of these incoming seniors, however, is their existing property in the state they left that needs to be addressed before going forward with a Home Equity Conversion Mortgage (HECM).

“Unfortunately, many of the HECM for Purchase inquiries are from folks who have a house ‘up north’ to dispose of before making their Florida purchase,” says Malcolm Tennant, CRMP, Access Reverse Mortgage Corporation in Clearwater, Fla.

Another challenge for local originators, according to Tennant, is that Florida calculates taxes for HECMs based upon 150% of the appraised value, so taxes are high and add to the closing cost burden.

The biggest challenge, though, is the state’s oversaturated market.

“The latest statistic I saw said over 300 companies wrote a reverse mortgage in Florida last year,” Tennant says. “The market is relatively tiny, and there are just too many companies chasing too little business.”

Peerless says he plans to ignore the negativity and focus in on what works, like HECM for Purchase and the voluntary pay down strategy.

“At the end of 2019 we can look back and see if we received the results we intended,” he says.

Written by Meredith Landry