Posted tagged ‘reverse mortgage trends’

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

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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

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!

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.

Reverse Mortgage Trends

January 9, 2008

j04013731.jpgSince being in the reverse mortgage industry for nearly three years, it is amazing to see how much it has grown . . . . .  and do believe we are in major growth spurt within the industry. 

At that time, these things were true:

  1. There were just a couple of major lenders of reverse mortgages. Wells Fargo, Financial Freedom, JB Nutter, and Seattle Mortgage, and some smaller lenders.
  2. Financial Freedom was the largest reverse mortgage lender
  3. The only product choice was the HECM Monthly and HECM Annual, as well as some proprietary products, mostly used in the Jumbo market.
  4. Reverse mortgages were mostly unknown in the lending and financial industry. Many professionals were not familiar with them. And even at that, they were largely misundersood.
  5. Reverse mortgages were largely sold to Fannie Mae.

Today, we live in a much different climate. Here are some of the things that are current today:

1. Wells Fargo leads the list of lenders who have done the most reverse mortgages with 21,893 in 2007 while Financial Freedom is now the second largest lender at 10,919. Bank of America (formerly Seattle Mortgage) jumped into the market this year, closed just over 2,600 reverse mortgages for the year. In addition, Countrywide Bank, one of the largest lenders in the country, jumped into the reverse market closing 1,115 reverse mortgages in 2007.

2. There is a myriad of HECM products including fixed rate, and libor based products. These products provide the borrower with more options in order to satisfy their long term objectives combined with interest rate flexibility.

3. Reverse mortgages are becoming common language among financial professionals, mortgage planners and seniors themselves. The reliability of the product coupled with an industry that strives to be integrity based, has allowed many to develop a trust that is needed in order to move forward in serving seniors and their families.

4. The secondary market is becoming more engaged with reverse mortgage loans. Ginny Mae has grown in their acceptance of reverse mortgages as they have created a HECM Mortgage backed security (MBS). According to Tom Geggel, a senior analyst with Callahan and Associates, Inc., “the move signifies the growing popularity of the reverse mortgage product and increases liquidity options for lenders.” You can read his article from CreditUnions.com “Reverse Mortgages Gaining Market Acceptance” for more insight into this trend.

Where reverse mortgages once were seen as a financial product for the lower class, they are becoming more and more of a tool used by people among all economic classes. Tax benefits, liquidity, cash flow, capped with a virual risk free solution, has come a long ways.

Though the list above is only a few of the trends that I have witnessed over the past few years, they will continue. Reverse mortgages will be a common retirement tool for millions of seniors in the future.