Magazine article Mortgage Banking

Moving Forward in Reverse: Some Really Savvy Lenders Have Jumped on the Reverse-Mortgage Origination Trend. Wall Street, Too, Sees the Promise of This Growing Market

Magazine article Mortgage Banking

Moving Forward in Reverse: Some Really Savvy Lenders Have Jumped on the Reverse-Mortgage Origination Trend. Wall Street, Too, Sees the Promise of This Growing Market

Article excerpt

Reverse mortgages are shifting into high gear as lenders rush to meet consumer and investor demand for the product. "The reverse-mortgage industry has really caught fire in the last couple of years," says Jeff Taylor, vice president, national reverse mortgage program manager, in the Greensboro, North Carolina, office of Des Moines, Iowa-based Wells Fargo Home Mortgage. [??] Marketing and lead generation for reverse mortgages have also become big businesses. A variety of techniques are being used, including print and media advertising and informational seminars. Television ads featuring a trusted senior actor are popular, sources interviewed say. [??] Why the increased interest in reverse mortgages? There are several reasons, says David Peskin, founder and chief executive officer (CEO) of Lender Lead Solutions LLC (LLS), Melville, New York. Demographics are playing a key role as baby boomers reach senior status. [??] "Seniors own roughly 40 percent of all houses," Peskin says. "Two-thirds of all seniors who own houses qualify for a reverse mortgage, so you're talking about nearly 20 million who qualify for a reverse mortgage," he says. Peskin's estimates are based on data from the 2005 American Housing Survey, issued by the Department of Housing and Urban Development (HUD) and the U.S. Census Bureau in August 2006, as well as LLS' research and experience in the reverse-mortgage market, he says.

Seniors are facing rising costs in several key areas, including health insurance, homeowners insurance and real estate taxes, Peskin notes. "Those increasing expenses are making it more difficult for seniors to remain in their homes. More people are living into their 70s and 80s than ever before, so the length of retirement is also becoming longer," Peskin adds.

Today's seniors have more responsibility for financing their retirement than previous generations, agrees Jim Mahoney, chairman of Irvine, California-based Financial Freedom Senior Funding Corporation, a subsidiary of Pasadena, California-based Indymac Bank FSB.

"There's pressure by the government to cut back benefits on Social Security, on Medicare and Medicaid, and corporate pensions are disappearing rapidly," Mahoney says.

"Home equity is usually 30 [percent] to 40 percent of a senior's net worth. When they look through their resources, the home equity is sitting there, and it can be tapped safely, conveniently and easily [with a reverse mortgage]," Mahoney says.

Mahoney also believes an industrywide effort to educate the public on reverse mortgages has helped boost volume. "We've spent a lot of time on education and getting the word out that [reverse mortgages] are very safe. If you have equity in your home, it's a tax-free way to stay in your home and plan your retirement," he says.

With interest rates still at record lows, other types of investments aren't as attractive to seniors, he notes. "Housing values remain strong, so seniors are sitting on a tremendous pile of equity," he adds.

Some of the country's largest lenders are now entering the reverse-mortgage business. Countrywide Financial Corporation, Calabasas, California, began piloting the Federal Housing Administration's (FHA's) Home Equity Conversion Mortgage (HECM) product late last year, a spokesperson says. Early this year, Countrywide rolled out a proprietary product, SimpleEquity[sm], which is now being offered in 46 states, he adds.

In April, Charlotte, North Carolina-based Bank of America announced an agreement to acquire the reverse-mortgage business of Seattle Mortgage Company, an indirect subsidiary of Seattle Financial Group Inc., Seattle.

Seattle Mortgage markets reverse mortgages under its division name, Reverse Mortgages of America, and has been in the reverse-mortgage business since 1995, according to a statement by Bank of America. It has a loan portfolio of 40,000 reverse mortgages, totaling more than $4 billion in outstanding balances. …

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