Sign of the times…reverse mortgage volume hit a new record high last month, according to data from the Department of Housing and Urban Development.
So-called Home Equity Conversion Mortgages (HECM), which allow homeowners aged 62 and older to pull equity out of their homes without making mortgage payments, increased 24 percent from February, setting a new record of 11,261 endorsements.
Year-over-year, endorsements were up by about 7,000 loans, thanks in part to a number of added flexibilities that make the loans more accessible to borrowers.
Recently, the maximum loan amount for reverse mortgages (what is the definition of a reverse mortgage?) was increased to $625,500 from $417,000, and the loans can now be used to purchase a new primary residence.
Legislation has also capped reverse mortgage fees and counseling fees can no longer be paid for by lenders or brokers in an effort to promote more unbiased information to consumers.
“As retirement investments have plunged and work opportunities grow scarce, reverse mortgages have become a valuable retirement planning tool for many older Americans,” said Eric Bachman, founder and CEO of Golden Gateway Financial.
“Reverse mortgages are also a powerful way for those facing foreclosure or in financial jeopardy to generate additional cash independent of a credit score or income requirements.”
Unfortunately, the growing trend reveals the troubling state our economy is in, with those on the brink of retirement scampering for new ways to stay afloat.
It’s one thing to see your home lose value when you’re middle-aged, but if you were relying on its value to fund your retirement nest egg, a reverse mortgage may be a very bittersweet alternative.
Of course, mortgage lenders are happy to issue such mortgages, because they work with the equity borrowers have in their homes, as opposed to the many millions of mortgages out there that are experiencing negative equity, which have a higher likelihood of default.
Wells Fargo, Bank of America, and Freedom Financial (formerly owned by Indymac) continue to be the industry-leading reverse mortgage lenders.
(photo: zzzack)
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