Falling Home Values hurt Reverse Mortgage Market
Friday, October 16th, 2009
Robert Griffin asked:
Many homeowners are concerned that the declines in the housing market will adversely affect the reverse mortgage market. Since home equity has dropped substantially and will continue to into the unforeseeable future, concerns about new reverse mortgages and existing one have arisen.
In a reverse mortgage, the bank makes payments to the homeowner instead of the homeowner making payments to a bank. To qualify for such a mortgage, a senior must be at least 62 years old and have equity in the home. Retirement savings diminished by stock-market declines are a big reason for renewed interest in reverse mortgages. It gives seniors some breathing room while their retirement holdings become available.
Those who already have a reverse mortgage should not worry about being poorly affected by the housing slump. The terms of a reverse mortgage remain the same through the life of the loan. A line of credit or monthly payments will continue to be available according to the terms of the loan. However, if for those who have not yet taken out a Reverse Mortgage, the declining home values could adversely affect their options. Borrowers may find that their homes are worth much less than they believed, and they may be unable to qualify.
A federally insured reverse mortgage is a good option right now, as it enables senior citizens to take money out of their homes. The number of reverse mortgages backed by the government in March and April rose from nearly 20% since last year. In April alone, the government insured 11,660 reverse mortgages, the highest monthly total since the government-backed program began in 1990. By contrast, the number of new home-equity loans, which similarly allow homeowners to tap the equity in their homes, fell around 70% in the first quarter from the prior-year period, according to Inside Mortgage Finance.
Increasingly, seniors are using reverse mortgages to supplement their retirement savings, which have been decimated by stock-market losses. At the same time, more seniors now qualify for a reverse mortgage since Congress in February raised the maximum home value that seniors can borrow against to $625,500 from $417,000. The bill also capped reverse-mortgage origination fees at 2% on the first $200,000 and 1% on any amount over that, not to exceed $6,000.
Though the FHA doesn’t make any loans, it insures lenders against any losses on federally insured loans, called Home Equity Conversion Mortgages. No one can fully predict the full extent of loss in the reverse mortgage business, but the Department of Housing and Urban Development recently asked for nearly $800 million in taxpayer money next year to counter deteriorating home prices. It is the first taxpayer subsidy in the 20-year history of the program.
Since a tough housing market has made it harder for seniors to sell their homes, a reverse mortgage may be an ideal solution. If you would like an information packet or would like to set up an appointment with one of our Reverse Mortgage Specialists, Please call (866) 683-3690 or view our online Reverse Mortgage Information.
Phillip
Many homeowners are concerned that the declines in the housing market will adversely affect the reverse mortgage market. Since home equity has dropped substantially and will continue to into the unforeseeable future, concerns about new reverse mortgages and existing one have arisen.
In a reverse mortgage, the bank makes payments to the homeowner instead of the homeowner making payments to a bank. To qualify for such a mortgage, a senior must be at least 62 years old and have equity in the home. Retirement savings diminished by stock-market declines are a big reason for renewed interest in reverse mortgages. It gives seniors some breathing room while their retirement holdings become available.
Those who already have a reverse mortgage should not worry about being poorly affected by the housing slump. The terms of a reverse mortgage remain the same through the life of the loan. A line of credit or monthly payments will continue to be available according to the terms of the loan. However, if for those who have not yet taken out a Reverse Mortgage, the declining home values could adversely affect their options. Borrowers may find that their homes are worth much less than they believed, and they may be unable to qualify.
A federally insured reverse mortgage is a good option right now, as it enables senior citizens to take money out of their homes. The number of reverse mortgages backed by the government in March and April rose from nearly 20% since last year. In April alone, the government insured 11,660 reverse mortgages, the highest monthly total since the government-backed program began in 1990. By contrast, the number of new home-equity loans, which similarly allow homeowners to tap the equity in their homes, fell around 70% in the first quarter from the prior-year period, according to Inside Mortgage Finance.
Increasingly, seniors are using reverse mortgages to supplement their retirement savings, which have been decimated by stock-market losses. At the same time, more seniors now qualify for a reverse mortgage since Congress in February raised the maximum home value that seniors can borrow against to $625,500 from $417,000. The bill also capped reverse-mortgage origination fees at 2% on the first $200,000 and 1% on any amount over that, not to exceed $6,000.
Though the FHA doesn’t make any loans, it insures lenders against any losses on federally insured loans, called Home Equity Conversion Mortgages. No one can fully predict the full extent of loss in the reverse mortgage business, but the Department of Housing and Urban Development recently asked for nearly $800 million in taxpayer money next year to counter deteriorating home prices. It is the first taxpayer subsidy in the 20-year history of the program.
Since a tough housing market has made it harder for seniors to sell their homes, a reverse mortgage may be an ideal solution. If you would like an information packet or would like to set up an appointment with one of our Reverse Mortgage Specialists, Please call (866) 683-3690 or view our online Reverse Mortgage Information.
Phillip