Stalwart: The reverse remains

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Reverse Mortgage Stability

The Reverse Mortgage Is Still Strong

Reverse Mortgage Stability
Since it’s creation in 1989 our product has withstood multiple recessions, boom and bust real estate markets, five presidents and stock market crashes. Consumers and their confidence in the HECM and the lenders that serve them will outlast lender exits and market turmoil.

6 comments

jan May 7, 2012 at 3:39 am

I hope the reverse lasts, the subprime was around since 1988 and it folded, the adjustable fha was around in the 80’s too and it went away, the stated program also folded as did the option arm, so you really can not say that just because something lasted it will be around. I realize the need for the reverse by the consumer, but there was needs for other programs as well that did not last. If real estate appreciates, I believe the program will remain, the question is when will real estate appreciate? How much negative equity can our HUD maintain, i believe the program will be around but a lot different in the future, thus I believe anyone who has an interest in a reverse should do it now instead of later

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Bernadette Collins May 7, 2012 at 10:26 am

I’m from (or was from) MetLife. I’d like to stay in the business.
You think that an increase in home values will increase RM volume. I think many are taking a Reverse because they cannot sell. Increase home values will lead to fewer Reverse Mortgages and more home sales – only my opinion!

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James E. Veale, CPA, MBT May 7, 2012 at 11:02 am

The HECM program is much different today than on 9/30/2009. Principal limit factors are much lower at expected interest rates of 5.75% for all ages. The ongoing MIP is also 150% higher than it was just a few years ago.

Yes, there is a huge pent up inventory of homes that seniors and all homeowners have not wanted to place on the market until home values are higher and no one has been able to reasonably estimate the size of that inventory. There is also a gigantic pent up inventory of default inventory as well.

Home values will come back. The question is when?

I agree with Shannon that home values are the single biggest barrier to a turn around in endorsement numbers.

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Joe Peay May 7, 2012 at 11:09 am

It sure would be interesting to be the proverbial fly on the wall to discern MetLife`s real reason for leaving the industry. However, I believe that someone is going to resolve the key barrier and thats communication to the market place of the real benifits of this product. With so many forces causing seniors to delay retiring the RM is stands as the key to the challenge.

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mike wyrostek May 7, 2012 at 5:46 pm

There are many reasons people can look to a reverse… older people running out of money, a person’s wish to pay off a forward loan , increase cash flow, medical reasons, age in place etc.. I believe the NCOA had info. saying 64% of the people over the age of 70 own their home free and clear.
So even tho , it would be nice to for real estate prices to stabilize, I still believe educating both the public and professional markets on how a reverse can help is still paramount in getting endorsement up.

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The_Critic May 11, 2012 at 3:30 pm

Mike,

Interesting comment.

HOWEVER, if home values keep dropping, there is no way endorsements will rise over prior periods. In four years despite 1) the senior population rising at historic percentage and absolute number rates, 2) a much larger but ever diminishing origination core educating the public, and 3) very positive rather than just negative reactions from the press and financial professionals, where is there any evidence endorsements or case number assignments are going up.

While lenders and some brokers are doing better due to the loss of the largest lenders, endorsements continue to fall at an ever greater rate than at any time in the history of the industry other than fiscal 2010. Facts are facts and trends are trends. Being overly optimist cannot undo droughts.

I agree with you in one respect. There is nothing we can do about home appreciation but seniors still need our help and providing education is the best sales tool we possess.

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