Magazine article Mortgage Banking

HECM Loans to Increase as Baby Boomers Retire

Magazine article Mortgage Banking

HECM Loans to Increase as Baby Boomers Retire

Article excerpt

Demand for the FHA's Home Equity Conversion Mortgage (HECM) loans, or reverse mortgages, is increasing and is expected to continue to rise as the baby boom generation enters its retirement years, according to a study by HUD's Office of Policy Development & Research (PD & R).

The study--The Home Equity Conversion Mortgage Terminations: Information to Enhance the Developing Secondary Market--which analyzed 16 years of HECM loan-level data, noted that approximately 77,000 HECM loans were originated in fiscal year 2006. PD & R expects this number to increase to 90,000 loan originations in fiscal year 2007.

HUD said the PD & R research is intended to address the critical need for information by analyzing FHA's historical loan-level data on HECM loan terminations--a major factor in assessing loan performance.

"An efficient secondary market would help the HECM program realize its full market potential to meet this growing demand," stated the study. "Information for investors to gauge the future performance of HECM loans has not been widely available, but is critical to help the secondary market mature."

According to HUD, reverse mortgages do not have a repayment schedule like traditional mortgages, and are typically not repaid until the borrower dies, moves or refinances. …

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