Every few weeks since the Department of Housing and Urban Development (HUD) first announced that they were to release a financial assessment, reverse mortgage lenders have gotten a vague update on their progress. Yesterday, HUD released a statement that shed a little more light on their plans for a financial assessment.
Reverse mortgages are something investment advisors typically steer clear of. Most advisors view the loans as too pricey and, due to the constant attention surrounding defaults, too risky as well. Investment advisors are more apt to seek out other alternatives for clients who run into financial problems during retirement. However, due to a recent article released in the April 2012 edition of Investment Advisor magazine, advisors may need to begin reconsidering the reverse mortgage for seniors.
Ever since reverse mortgages first skyrocketed into popularity, defaults have been a major source of concern. While most borrowers keep their loans in good standing, a small portion of borrowers have found themselves in technical default after failing to uphold the terms of their loan. These defaults have led some consumers to believe that reverse mortgages are riskier than forward mortgage loans. Fortunately, this seems to be changing.
The Federal Housing Administration (FHA) first began insuring reverse mortgages in the late 1980s. In 1987, the federal government put a limit on the number of outstanding reverse mortgages that FHA could insure. At first, the government set the cap at 2,500 outstanding loans.
The reverse mortgage industry has not seen a new product since the release of the HECM Saver in October of 2010. According to discussions that took place earlier today, this may be changing soon.
This afternoon, the National Reverse Mortgage Lenders Association (NRMLA) held a regional meeting in New York City. At this meeting, representatives discussed the possibility of a new reverse mortgage product that would be insured by the Federal Housing Administration (FHA). While this is the first the industry is hearing about it, it is not the first time that NRMLA has discussed the possibility.
According to a recent Associated Press and Life Goes Strong survey, 11% of baby boomers are “deeply confident” that they are financially prepared for retirement. An astounding 89% of boomers have feelings ranging from somewhat confident to downright scared. Looking at these statistics, it’s no surprise that seniors are asking, what is a reverse mortgage?
A few days ago, the Washington Post published an article explaining the benefits of reverse mortgages. While media opinion has been slowly changing, this article marks a solid shift in the reverse mortgage’s reputation. Major media outlets are no longer adamantly warning seniors of potential reverse mortgage pitfalls. Instead, major media players are now helping seniors take a closer look at a financial product that might have a huge impact on their ability to remain financially independent.
According to data collected by the Department of Housing and Urban Development (HUD) and HECM counseling agencies between September and November of 2010, the average reverse mortgage borrower is 73 years of age. The age of the average borrower who goes through counseling is a bit younger at 71.5 years of age. The interesting thing about these statistics is that the average age is steadily decreasing. Today, seniors are choosing to get reverse mortgages sooner than they did in the past.
According to data released by AARP, HECM reverse mortgages are becoming increasingly popular with younger seniors. In the past, seniors typically got reverse mortgages as a last resort after depleting their retirement savings. Today, around 50% of reverse mortgage borrowers are under 70 years of age.
Currently, there are very few reverse mortgage requirements that seniors must meet in order to qualify for a loan. To qualify, seniors must be at least 62 years of age, own a qualified property and have a substantial amount of equity in their home. The requirement that might be discouraging seniors is the mandatory housing counseling that every borrower must complete. Financial experts believe that counseling is intimidating some borrowers and turning them away from reverse mortgages.
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