Whatever happened to the mainstreaming of reverse mortgages in retirement plans? That’s a question addressed in a recent Wealth Management column…
Continue readingWaiting for the reverse mortgage surge
The Sisyphus of Mortgages
The Uphill Battle for Market Acceptance
Like the mythical phoenix, the Home Equity Conversion Mortgage industry rose from the ashes of the housing crash and economic crisis of 2008, followed by several reincarnations as the reverse mortgage program was tweaked, pruned, and curbed the pool of eligible borrowers. Yet, despite the undeniable lack of retirement preparedness among retiring homeowners, reverse mortgage acceptance and market volumes remain relatively stagnant. Notwithstanding these hurdles, several industry participants and financial pundits believe the HECM is poised for growth.
Much like Sisyphus who eternally pushes a rock up a hill- only to have it continually come back down, our industry pushed forward past the housing crash as home values rebounded, only to be pushed back by a never-ending onslaught of new rules and product restrictions. Do we resign ourselves to unexceptional growth in the coming years, or explore more useful ways to capture the imagination and hearts of older homeowners?
Our industry has been steadily and quietly rebuilding as lenders have not only adapted to the new landscape of HECM lending and regulations, but also their marketing approach. As we stand midway between the past economic crash and future opportunity we should invest our time wisely to prepare. Chief among those preparations is how we approach eligible homeowners. As counterintuitive as the reverse mortgage is, we must avoid using mortgage terminology that is not analogous to traditional mortgages such as…
Shutting Down: Why many reject the HECM
The hurdles to increased acceptance are complex
Today there is an estimated $4.4 trillion in home equity for those 65 and older, many who are woefully unprepared for retirement. As HECM endorsements continue to underperform years past, many ask why more eligible homeowners do not get a reverse mortgage.
A recent report from the Urban Institute reveals some of the underlying causes of homeowners reluctance to get a reverse mortgage despite the potential benefits. For years our industry has generally accepted the statistic that a mere 2% of eligible homeowners. However, last summer a MIT study provided a more detailed summary. Analyzing over 3,700 retired households with a loan to value ratios less and 40%, they found 55% would be eligible for a HECM. The bottom line, 12-14% of all retired households in the U.S. are eligible for the reverse mortgage.
The DC think tank, the Urban Institute, published a report entitled ‘Seniors’ Access to Home Equity’, which determined that adults 65 and older control $4.4 trillion of the total $11 trillion held by American homeowners. With nearly half of households in this group having zero retirement savings why are more not seizing the opportunity to fund their retirement years using a reverse mortgage? The primary factors, the report shows, are
A Change of Heart in Reverse
What changed the mind of one Chicago Tribune Columnist?
It is admirable to have strongly-held beliefs. It is even more laudable when one changes their position based on new facts and insight. That’s exactly what happened for one Chicago Tribune financial columnist.
“My views on reverse mortgages have become somewhat more favorable”. This introductory quote leads the Tribune’s recent article “Reverse Mortgages Have Improved, but the Buyer Still must beware”. Like many other financial professionals, columnist Elliot Raphaelson believed that reverse mortgages should only be used as a last resort. A belief that was often codified in financial planning organizations like FINRA, which later removed this phrase from their advisories.
Raphaelson fairly points out a historic and reputation-challenging problem, that many individuals…
Download a transcript of this episode here.
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Coming Out of Denial
“Refusal to believe until proof is given is a rational position; denial of all outside our own limited experience is absurd.” These words ring no truer than when it comes to those who embrace or reject the federal-insured reverse mortgage.
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