The reverse mortgage market could “grow rapidly,” according to a brief from credit ratings firm DBRS, leading the company to follow the market closely and help work toward ensuring the safety and sustainability of reverse mortgage products.
“Will reverse mortgages become the new home equity loan?” DBRS asked in a brief send to clients this week. While they have historically been viewed as a way for older homeowners to enhance their quality of life, they could be positioned to boom, the brief says, due to older Americans being especially hard hit by recessionary pressures.
“They are struggling financially to pay for everyday expenses and have suffered sizable losses in their retirement accounts,” DBRS writes. “Additionally, the low interest rate environment has pretty much depleted their disposable cash. As a result, reverse mortgages are being used to provide immediate relief and help to stabilize a difficult financial situation. For older homeowners with sizable debt, a reverse mortgage may be the only way they can retire.”
A growing level of home equity among the older population is another indicator for the market’s growth potential, the credit ratings group writes.
“…by some estimates, older homeowners hold more than $3 trillion in home equity and with more than 30 million baby boomers poised to enter retirement; the market for these mortgages could rapidly grow. As a result, DBRS will continue to monitor the industry for its use of reverse mortgages as well as the CFPB’s efforts to ensure that seniors are appropriately educated in the product so there are fewer loans that end up in foreclosure.”
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Written by Elizabeth Ecker