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Affluent Americans Are Increasingly Interested In Reverse Mortgages
The reverse mortgage market has always focused on middle- and lower-income Americans, retirees with home equity and a need for cash. And while controversy has often surrounded the reverse product, it has been continually represented as a viable product for consumers who meet the requirements.
Historically, 95% of the reverse mortgage market was controlled by the Federal Housing Administration (FHA) Home Equity Conversion Mortgage (HECM) program, which requires borrowers to be at least 62 years of age and limits the amount borrowed to $726,525, as of this year. But, today’s retirees don’t always match the profiles of prior generations. According to a report by Stanford Center on Longevity, one-third of Baby Boomers had no money saved in retirement plans as of 2014, and they had more debt than prior generations. Despite their lack of savings, as of 2017, adults age 62 and over had accumulated $6.3 trillion in home equity, and they’re increasingly staying put rather than downsizing like their predecessors did. Plus, there’s another group of baby boomers sitting on large, high-end homes they cannot sell, especially across the Sunbelt (the southern region of the U.S., stretching from Southern California across to the Southeast), according to Candace Taylor of The Wall Street Journal.
New Proprietary Reverse Mortgage Products Were Designed For Affluent Seniors
Seeing the growing demand from younger borrowers and those with more expensive houses, five lenders – Finance of America Reverse, One Reverse Mortgage (by Quicken Loan), American Advisors Group, Reverse Mortgage Funding, Longbridge Financial – have recently launched proprietary reverse mortgage products, which are not as restrictive as the FHA’s HECM loans. For example, the Equity Elite reverse mortgage from Reverse Mortgage Funding loans up to $4 million in home equity to reverse borrowers as young as 60.
Although the lenders offering proprietary reverse mortgages are not reporting on origination volume, representatives of these financial institutions have noted increased popularity. In part, that’s due to shifts in perception among affluent borrowers. As explained by Steve Resch, Vice President of Retirement Strategies at Finance of America Reverse, “…there’s been an enormous change in the past two years as to how they [financial advisors and consumers] receive the message [about the benefits of reverse mortgage] that we’re sharing with them.” Referencing attendees of April’s Retirement, Taxes & Income Strategies Symposium, Resch said, “They’re higher net worth people, and many of them came up and talked to us about reverse mortgages and were saying that they’d heard more and more positivity about them, and wanted to know how they worked.”
Affluent Acceptance Of Reverse Mortgages Renews Mainstream Desire
As is often the case, mainstream consumers follow the trends of the affluent ― even when it comes to acceptable finance products. In April, there was a 12.7% increase from the month prior in the number of HECM reverse mortgages closed, according to Reverse Mortgage Insight which noted the reverse market “is looking fairly positive as springtime rounds into full form around the country.”
Reverse Mortgage Education May Be The Key To Reverse Mortgage Marketing Success
As seniors investigate their financial options, emotions can range from inquisitive to fearful. Reverse mortgage marketers adopting an education- and solutions-based sales process are likely to earn the trust of their markets. In addition to engaging with consumers inquiring online or via calls about immediate qualification for reverse mortgages, consider building a list of subscribers to whom you can deliver continual outreach. As reverse mortgage rules and interest rates change, you can make sure your message is delivered to the audience most likely to seek more support and information.
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