Archive for the ‘Reverse Mortgage Industry’ category

Changing the Role of Home Equity

July 15, 2009

j0440988I recently have read a the results of a study issued by MetLife and the National Council on Aging called Tapping Home Equity in Retirement. The purpose of the study was to examine the different options for using home equity in responding to new retirement realities. The study comes from the consumer perspective and the role that home equity is having on retirement. As retirement resources have changed, due to recent economic conditions, this report analysis their findings and provides legitimate opportunities for many retirees when evaluating their retirement resources. As the Baby Boomer generation matures and swoops into the retirement scene, home equity may become a very good option for security during this time period. On the other hand, if used unwisely, without proper counsel, it could become a source of financial insecurity, according to the report.

The study breaks down the market into four different groups: 1) Affluent, 2) Middle Income, 3) Poor. Each demographic is impacted differently in their use of equity in retirement, and each has different implications.

For financial planners, CPA’s, attorney’s and other professionals who deal in the retirement market, this report is thorough. It really is a must read as we all work to educate, inform, and provide guidance into the financial world.

Tapping Home Equity in Retirement

Reverse Mortgages: The Future?

May 19, 2009

j0433797If you have been one to follow the reverse mortgage industry over the years, you have seen a lot of change. For the first 15 years of the HECM product, there was virtually little change. The product was what the product was. HECM150 was basically what was sold as the main product throughout the country. Today there is change what seems to be every week. With the economic issues that our country is facing, the industry has been required to change.

Dennis Haber an attorney that has focused on the reverse mortgage industry and has been influential within this industry. He has written a couple of blogs that draw attention to the current and pending situation around the reverse mortgage product and is an advocate for the industry. Here, he explains what he calls the Reverse Mortgage Storm, Hurricane 1 & 2:

The Reverse Mortgage Storm, Hurricane 1

The Reverse Mortgage Storm, Hurricane 2

Reverse Mortgage Industry – Current Implications

May 14, 2009

j0440988The reverse mortgage industry continues to grow nationwide. The numbers Year to Date have increased both in applications and in total endorsements (closings). But this is just a small picture of the overall industry. Over the past two years we have seen an industry get hit hard by a drop in home values, economic uncertanties, and interest rate adjustments. In addition, there has been a huge increase in the number of people who are originating reverse mortgages. Though this is good news from the standpoint that this product has become more of a standard product within the financial industry, it has impacted the total number of loans that any one individual can do. So we have a small increase in the total number of endorsements, coupled by more people doing them. This leaves many unable to close enough loans to make any kind of a marginal living. Many originators are finding business very difficult as competition has impacted the overall market.

This scenario is not surprising to me. Four years ago when I started in the industry it was an inevitable consequence to the financial condition of many of our seniors. I predicted the fact that banks and credit unions, as well as mortgage brokers would find this tool as one they need to add to their product mix. It was my attempt to make an impact in the industry at that time to position myself to be the local expert. And I have done just that!

What I did not see coming was the huge reduction in home values. At that time values were going, let me just say “bazerko” (sorry, probably not a word). Values are often much lower than the homeowners realize. Recently I had a home appraised that the homeowner was expecting $600-$700k in value. It is a phenomenal home! It was appraised at $485k. Now this is somewhat of an anomoly because of the lack of similar comparisons available, but more times than not, values are underestimated because there was a lack of understanding. The conversation of value is a critical one to have with the homeowners. Managing expectations provides open communication, and in the end, good relationships with clients (whether or not they were able to do the loan).

The other thing that was not expected was the increase in interest rate margins that we have seen with Fannie Mae. Fannie Mae, who purchases 90% of all reverse mortgages, has moved into a live pricing environment where the interest rates could fluctuate during the processing of the loan. For some, this reduces the expected benefit or all out takes them out of their ability to attain a reverse mortgage. Though I have been able to work around most of these situations to this point, it remains an unsettling reality in today’s market.

Reverse Mortgages: Live Pricing

April 22, 2009

j03826741For years prior, reverse mortgages were fairly constant. That is, we were in a fairly stable environment. Today, with the credit crunch that we find ourselves in, the issue is anything but stable. Where home values are a major problem in all parts of the country, and interest rates are at all time lows, the industry is in a position that it hasn’t ever seen. In fact, I just read a blog recently that did a great job of explaining more of the details and how our products are now based on “live pricing” rather than the stable pricing of the past.  Check out this blog entry to better understand how we got to be where we are today: http://reversemortgageloanblog.com/2009/04/21/credit-crisis-alters-reverse-mortgage-rules/#more-625.

4 Year Anniversary . . . Reverse Mortgages

March 30, 2009

mcj0439594000011This week I celebrate four years in the Reverse Mortgage industry and wow has it changed! I realize that four years isn’t a super long time as there are some people out there that have been doing it for 3 times that. But even in four years, the industry has grown, the product has changed, and the momentum is big. So big, that it is my opinion that we are nearing the tipping point in this vast market. Here is why:

1. Financial Planning Tool – among many (but probably not a majority), reverse mortgages have become a common topic of conversation. Clients are asking about them. This will grow as financial planners realize that this tool has a place in financial planning. Even now, though, there is a huge misunderstanding among many financial advisors as to what a reverse mortgage really is and what it can do.

2. More lenders – When I started just four years ago, there were only a few lenders that did reverse mortgages to any extent. Today, there are many more lenders who have entered the market. The competition is fierce.

3. Interest Rates – for the first15 years, reverse mortgages had a common spread of 1.5% and basically three different products: monthly adjustable, annual adjustable, and a Fannie Mae proprietary product. Today, we have live pricing with basically two different index rates, jumbo products (though today these are rarely offered; they will come back as the market improves), in addition to the annual adjustment rate product.

4. Marketing – Even four years ago you never heard anything about reverse mortgages. Today there are articles, advertisements, TV Ads, and radio ads running all of the time. It is becoming common language, but still very misunderstood.

I must say that even as the market and industry have grown, this is a fun place to be. It provides solutions for those who had no where else to turn. In doing four years of work within the industry, I do take some pride in the fact that I have not talked to any of my past clients who regretted their decision. They are now living in financial freedom that they have come to enjoy!

AARP Report: 20 year Anniversary for HECM’s

February 29, 2008

j0422149.jpgI recently came across a report that was completed by AARP. The name of the report is “Reverse Mortgages: Niche product or Mainstream Solution.” In the celebration of the 20th Anniversary of FHA’s HECM, AARP did thorough research to find out how far the HECM has come since its birth in 1988.

Within the report, which is quite lengthy, you will learn about how many HECM’s have been completed, consumer awareness issues, what consumers had used reverse mortgages for, and their evaluation of how the reverse mortgage accomplished their goals. It also takes a look at the reasons some consumers decided against taking out a reverse mortgage. Lastly, the full report goes into what recommendations they have for the development of the reverse mortgage products.

For anyone interested in the details of the industry, this is a must read. You can either read the full version(aarp_rmreportfull.pdf), or you can read the brief version(aarp_rmbrief.pdf) of the report. Enjoy!

My Clients – Some Reverse Mortgage Statistics

January 18, 2008

j0422176.jpgOver the last few years, I have kept some statistics about my clients. These statistics are based on nearly three years of working in the industry. Keep in mind that reverse mortgages have become much more accepted over that past year than they had prior to that time.

Average Age: 73.62
Youngest: 62
Oldest: 97

These stats are based on the age of the youngest borrower.

Primary Purpose:
Increase Income: 73.2%
Emergency Fund: 18.3%
Medical: 6%
Pending Home Project: 3%

Most of my clients had a combined purpose for taking out their reverse mortgages as many established an emergency fund with their line of credit, and either paid off their mortgage or received the tenure payment as income. In addition, many of my clients had medical bills that they needed to pay off, or they wanted an emergency fund in order to pay for some upcoming medical bills. Dental procedures and the desire to travel were additional reasons to consider a reverse mortgage. In most cases, the reason for taking out a reverse mortgage was based multiple reasons. In all actuality, though those listed above were the specific reasons, the more general and biggest result was that it created a peace-of-mind about their financial situation.

Married: 51%
Single: 49%

Referred by a friend/relative: 51%

Working in the senior industry, it is very common for people to lean on knowledge and experience from friends and family. In most cases, there is a level of trust that has already been established when a friend or family member refers someone. This has been my most enjoyable client to work with.