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Saturday, December 27, 2008
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%.
All polled telling sob stories would have one thing in common, they are all doing forward mortgages. If I polled a reverse mortgage loan officer I'd hear something quite different.
The reasons are multifaceted. The main reason probably revolves around investors' willingness to be involved in the reverse mortgage side of lending. It simply does not carry the risk of the forward market, as borrowers are not required to repay the lender on a monthly basis.
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.
Furthermore, with the ever increasing cost of living and this group's propensity to save less than its parents, the need for additional income will persist.
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.
There is a ton of uncertainty in the marketplace, and this will remain so for the indefinate future. Home value are taking a beating and we really don't know how bad it will get.
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%.
All polled telling sob stories would have one thing in common, they are all doing forward mortgages. If I polled a reverse mortgage loan officer I'd hear something quite different.
The reasons are multifaceted. The main reason probably revolves around investors' willingness to be involved in the reverse mortgage side of lending. It simply does not carry the risk of the forward market, as borrowers are not required to repay the lender on a monthly basis.
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.
Furthermore, with the ever increasing cost of living and this group's propensity to save less than its parents, the need for additional income will persist.
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.
There is a ton of uncertainty in the marketplace, and this will remain so for the indefinate future. Home value are taking a beating and we really don't know how bad it will get.
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:
A thorough reverse mortgage explanation is given in this 11 page Texas Reverse Mortgage Report. For nineteen most frequently asked questions regarding California and reverse mortgage issues, click here.
posted by Credit Counseling at
10:43 PM
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