Industry News

‘Borrowable’ home equity makes a tantalizing target

Changing market can create opportunity or crisis

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Despite worries about adjustable-mortgage resets next year that will hit more than 10 percent of all households with outstanding home debt and a fear of government pressure to limit so-called "exotic products," lenders still like the "LTV," or loan-to-value, odds, which have 51 percent of all equity in American households untapped. Half, then, of all "borrowable" equity in residential real estate is (technically anyway) up for grabs, a tantalizing target for lenders these days when overall mortgage originations are down at least 20 percent. "Fifty-one percent: that's an enormous amount of home equity," declares IndyMac Bank CEO Michael Perry, who notes that most of this available cash is "skewed toward seniors." This makes Perry bullish on reverse mortgages, so far a niche product for older homeowners (age 62 and up), who meet a list of protective conditions. While he admits that "the (reverse mortgage) products, in the early days, weren't great," he insists "the current FHA produc...