New HUD Data Shows Growth in Reverse Mortgage Activity
Washington, D.C. – Despite turmoil in the broader mortgage market, new data released by the Department of Housing and Urban Development shows that on a calendar year basis, the number of federally insured reverse mortgages closed in 2008 grew 6.4% to 115,176 loans.
“As more seniors try to figure out how to cope with today’s economic conditions, the HECM program takes on increased significance,” said Peter Bell, President of NRMLA.
A more detailed analysis of HUD data conducted by Reverse Market Insight, a consulting firm based in Aliso Viejo, CA, indicates that three of the top 10 markets in the country are located in Florida. Miami was the top market in the country by a 2 to 1 margin. FHA insured 9,561 HECM loans in the Miami metro area, followed by Los Angeles (4,126), Tampa (3,956), Santa Ana, CA (3,695), Baltimore (3,595), Phoenix (3,582), Orlando (3,556), Richmond, VA (3,493), Philadelphia (3,317) and Chicago (3,184) to round out the top 10.
Further analysis by Reverse Market Insight shows that 2,949 lenders originated at least one HECM loan in 2008, a 76.5% increase over the prior year.
Bell anticipates newly enacted changes to the HECM—including a higher loan limit, lower fees, home purchase component, co-op eligibility and stricter consumer protections around cross-selling reverse mortgages with other financial services products—will lead to even more growth in the coming months.
“The strong growth we’re seeing suggests the HECM program remains a strong and viable option for America’s seniors as they develop their financial plans for retirement ,” added Bell. “
Reverse mortgages are becoming a more mainstream financial planning tool for older homeowners. A reverse mortgage enables older homeowners (generally age 62+) to convert part of the equity in their homes into income without having to sell the home, give up title, or take on a new monthly mortgage payment. The reverse mortgage is aptly named because the payment stream is “reversed.” Instead of making monthly payments to a lender, as with a regular mortgage, a lender makes either one or more payments to the borrower. The loan is repaid when the borrower moves out of the property.
NRMLA is a nonprofit trade association, based in Washington, DC, whose mission is to support the continued evolution of reverse mortgages as an important financial option for senior homeowners while educating both its members and consumers about the varied applications of this unique loan. Members sign a Code of Ethics and Professional Responsibility pledging to abide by guidelines that assure fair, ethical, and respectful practices in offering and making reverse mortgages to seniors. Details on NRMLA, reverse mortgages, and a list of reverse mortgage lenders in each state are available on NRMLA’s Web site, at http://www.reversemortgage.org.