Rising Senior Residence Fairness and Reverse Mortgage Quantity Stay Far Aside
According to a recent breakdown by the National Reverse Mortgage Lenders Association (NRMLA) and data analytics firm RiskSpan, homeowners aged 62 and older saw their shared home ownership increase by 3% in the fourth quarter of 2020 compared to the previous quarter. According to the Reverse Mortgage Market Index (RMMI), that’s an increase of around $ 234 billion to a record $ 8.05 trillion.
Despite this surge in senior home equity, reverse mortgages themselves remain “unpopular,” according to a column published by the Boston College Center for Retirement Research (CRR).
“The total value of equity in older American homes has doubled since 2010, reaching $ 8.05 trillion at the end of last year,” the column said. “The irony is that state-insured reverse mortgages, which allow a longtime homeowner to redeem tens of thousands of dollars in equity, are not very popular. According to the US Department of Housing and Urban Development (HUD), only 42,000 Home Equity Conversion Mortgages (HECMs) were sold last year – half as many as in 2010. “
One possible reason for this, according to the CRR, is a foundation in a 2017 Consumer Financial Protection Bureau (CFPB) report on reverse mortgages, which said certain homeowners may find the reverse mortgage agreement just incompatible with their plans for their property.
“Homeowners looking to sell their homes after taking out a reverse mortgage are particularly at risk as the loan balance is likely to grow faster than their home value will rise,” the 2017 CFPB report said Limit options for moving or dealing with a financial shock. “
However, according to a study authored by CRR co-founder Alicia Munnell in January 2020, most retired homeowners simply choose not to move out of their homes, and a HECM is a potential option that an older senior could potentially choose to create additional cash flow in later life.
“We accept it as ‘normal’ to spend 401,000 funds, but somehow home equity is sacrosanct,” said Dave Gardner, a former part-time reverse mortgage broker at CRR. “[Retirees should ask themselves:] Could a reverse mortgage give you a better result and extend the life of your nest egg? “
Home equity remains one of the largest assets retirees have access to, according to a 2017 study by CRR. This could suggest that a reverse mortgage should at least be on the proverbial table of options according to the CRR.
“If you are struggling to meet your retirement expenses, consider a reverse mortgage,” the column says.
Read the article on Boston College CRR.