Why Credit Crisis isn't Touching Reverse Mortgage Biz
We have all read and heard about the results of the the credit crisis, which all begain with high-risk home loans. The entire forward mortgage industry is in a world of hurt.
I have friends in the mortgage industry from Seattle to Phoenix and east into Texas. All of their respective mortgage businesses are down. Some are down as much as 75%.
One common denominator of those crying the blues is that they are all in the forward mortgage segment of mortgage lending. On the contrary, reverse mortgages are booming.
The question is why? First, since banks on the forward end are so hesitant to lend out money one can see how a reverse mortgage, which does not require monthly interest or principal payments, might be a healthier investment for a bank or the banks investors.
If their is a risk to the reverse mortgage side it is in the possibility that one day more would be owed on the home than the home is actually worth. This is why lenders create reasonably large cushions between the value of the home and the actual loan.
Adding to the recipe, the over 62 market is growing like a weed. Many demographers believe the over 62 population will double by the year 2030.
This age group has one problem its parents didn't. It's parents faced cost of living increases, as we all do, but this generation of seniors didn't save like it's folks did. The need for additional income is greater with this group.
I haven't looked at the exact numbers of how much the stock market is down, but many seniors are running scared because of it. Many of my new reverse mortgage applications have been predicated on this.
From early indications this group is taking out a reverse mortgage and using it in one of two ways. They are either paying off a mortgage to free up more money for savings, or they are simply using the loan as a financial safety net.
It's hard to say exactly where this goes in the next few months to the next several years. Home values continue to fall nationally and no one knows where they will bottom out.
The reverse mortgage industry could take a hit if house valuations take a deep plunge. However, with a softer landing the reverse industry will continue its upward curve.
I have friends in the mortgage industry from Seattle to Phoenix and east into Texas. All of their respective mortgage businesses are down. Some are down as much as 75%.
One common denominator of those crying the blues is that they are all in the forward mortgage segment of mortgage lending. On the contrary, reverse mortgages are booming.
The question is why? First, since banks on the forward end are so hesitant to lend out money one can see how a reverse mortgage, which does not require monthly interest or principal payments, might be a healthier investment for a bank or the banks investors.
If their is a risk to the reverse mortgage side it is in the possibility that one day more would be owed on the home than the home is actually worth. This is why lenders create reasonably large cushions between the value of the home and the actual loan.
Adding to the recipe, the over 62 market is growing like a weed. Many demographers believe the over 62 population will double by the year 2030.
This age group has one problem its parents didn't. It's parents faced cost of living increases, as we all do, but this generation of seniors didn't save like it's folks did. The need for additional income is greater with this group.
I haven't looked at the exact numbers of how much the stock market is down, but many seniors are running scared because of it. Many of my new reverse mortgage applications have been predicated on this.
From early indications this group is taking out a reverse mortgage and using it in one of two ways. They are either paying off a mortgage to free up more money for savings, or they are simply using the loan as a financial safety net.
It's hard to say exactly where this goes in the next few months to the next several years. Home values continue to fall nationally and no one knows where they will bottom out.
The reverse mortgage industry could take a hit if house valuations take a deep plunge. However, with a softer landing the reverse industry will continue its upward curve.
About the Author:
To get a great guide discussing the workings of the California reverse mortgage go here. For a great Q&A site for the reverse mortgage in California questions, you click here.
posted by Credit Counseling at
10:31 PM
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