The volume of federally insured reverse mortgages taken out by older homeowners in recent months has increased by 76 percent from a year ago, as a blistering record pace of originations continues, according to the National Reverse Mortgage Lenders Association.
NRMLA attributed the surging popularity of reverse mortgages to several factors, including greater consumer awareness of and comfort with the product, and the increasingly tighter budgets of America’s seniors.
“While some signs suggest a recovering economy, many retirees are still struggling day-to-day to live comfortably or make ends meet,” said NRMLA President Peter Bell. “As a result of this, more and more older Americans are turning to reverse mortgages as the solution to their financial needs. With the help of a reverse mortgage,” he continued, “these seniors find they can cope with the myriad of financial pressures that include rising out-pocket-costs for medical care and prescription drugs, increasing property taxes on their homes, eroding Social Security checks, and meager rates of return from CDs and money market funds due to low interest rates.”
According to NRMLA, federal statistics show that the volume of federally insured reverse mortgages – called Home Equity Conversion Mortgages (HECMs) – made nationwide in the four-month period from October 2003 through January 2004 (8,700 loans) was 76 percent higher than the level during the four-month period ending January 2003 (4,948). HECM volume in January 2004 alone (1,572) was 16 percent higher than January 2003 (1,359).
The figures illustrate the growing, record popularity of reverse mortgages among older homeowners. In the federal fiscal year (FY 2003) that ended Sept. 30, 2003, there were 18,097 HECMs made nationwide, an increase of 39 percent from the previous fiscal year.
HECMs are the most popular of the three reverse mortgage products currently available. Accounting for about 90 percent of all reverse mortgages made today, and available in every state, HECMs are insured by the Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development, which compiles the statistics on HECM volume.
HECM volume for the four-month period ending Jan. 31, 2004, was up from a year ago in each of the top 10 markets in the country. According to HUD’s statistics, the top 10 HUD field offices reporting the greatest HECM volume in the four-month period ending Jan. 31, 2004, were: (1) Los Angeles, 572 HECM loans made (compared with 226 in the four-month period ending January 31, 2003); (2) Santa Ana, Calif., 409 (160); (3) San Francisco, 345 (159); (4) Denver, 344 (267); (5) New York, 314 (261); (6) San Diego, 292 (108); (7) Detroit, 277 (248); (8) Boston, 253 (82); (9) Coral Gables, Fla., 237 (149); and (10) Minneapolis-St. Paul, Minn., 226 (117).
A reverse mortgage is a loan that enables homeowners 62 or older to borrow against the equity in their home, without having to sell their home, give up title or take on a new monthly mortgage payment. The loan proceeds can be used for any purpose, and taken out as a lump sum payment, fixed monthly payment, line of credit (except in Texas) or a combination. The loan amount depends on the borrower’s age, current interest rates, and the value and location of their home. A reverse mortgage isn’t repaid until the borrower moves out of the home permanently, and the repayment amount can’t exceed the value of the home. After the loan is repaid, any remaining equity is distributed to the borrower or borrower’s heirs/estate.
A senior’s home doesn’t have to be owned free and clear to qualify for a reverse mortgage.
Washington, D.C.-based NRMLA is a nonprofit trade association whose members make and service reverse mortgages throughout the U.S. and Canada.
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