The reverse mortgage market is evolving for the first time in a decade, as the industry pivots to address sagging sales and what it sees as a new opportunity presented by the number of baby boomers retiring.
Reverse mortgages are a type of loan that allows seniors to tap their home equity, as a lump sum or line of credit, without having to make out-of-pocket payments. The market has been dominated by a single product, a home equity conversion mortgage, which is insured by the federal government and sold by approved lenders.
However, sales have faltered following changes the federal government made in October 2017 that increased upfront borrowing costs and reduced borrowing limits. Sales of home equity conversion mortgages since October (the start of the government’s fiscal year) are roughly 18,500 through April — on pace for a 42% decline from two years earlier, when the total number of mortgages was more than 55,000.
“If there’s an additional $8,000 to $10,000 to close on the loan, that’s sticker shock,” said Jamie Hopkins, director of retirement research and vice president of private client services at Carson Group. “It’s a large amount, it feels very expensive, and that’s what we were hearing from loan officers: It’s a big problem.”
Note: Figures represent the number of Home Equity Conversion Mortgages, a federally insured reverse mortgage product, made during the federal fiscal year, which begins Oct. 1 and runs through Sep. 30. *Through April 2019.
Source: National Reverse Mortgage Lenders Association
The reverse mortgage market has been dominated by HECMs for