American Advisors Group will offer a new reverse mortgage product in the next two months, Bloomberg Businessweek writes in a recent article.
The new product is being launched in addition to Urban Financial of America LLC’s “HomeSafe” product, which will be made available to borrowers Sept. 2.
American Advisors Group and Urban Financial of America are two of the five largest reverse-mortgage companies by volume. Both companies’ new loans for older borrowers will be for those whose homes are worth more than the $625,500 limit for debt backed by the Federal Housing Administration (FHA).
The reverse mortgage market has, for several years, offered just a single proprietary reverse mortgage: Generation Mortgage’s Generation Plus jumbo loan, which was reintroduced in 2010.
Jumbo reverse mortgages, which unlike smaller loans aren’t insured by the FHA, virtually disappeared after the real estate crash as housing values tumbled and securitizations froze.
A proprietary reverse loan, or one without government backing, “has been like a unicorn,” Gregg Smith, chief operating officer of San Diego-based One Reverse Mortgage LLC, which is considering a jumbo program, tells Bloomberg. “Everyone was talking about it, but we hadn’t seen one. I would say within six months we’ll see at least two or three added.”
Bloomberg also discusses the negative impact the Great Recession had on reverse mortgages, and how FHA reforms are making the product more attractive to both borrowers and lenders.
The pace is likely to pick up in the coming years, Alicia Munnell, director of the center for retirement research at Boston College, says.
“Retirement needs have expanded and the retirement system has contracted, so more people will need to turn to their homes” for income,” Munnell says.
Read the full article here.
Written by Cassandra Dowell