• Is the Credit Crunch Effecting Reverse Mortgages?

    Posted on February 10th, 2010
    Craig Phillips No comments

    Everyone I talk to asks me how the credit crunch is affecting reverse mortgage. This is a great question as there are many different aspects of the credit crunch which are helping reverse mortgages and other aspects which are having a negative impact.  Home value is one factor impacting reverse mortgages.  Due to the increased amount of foreclosures and distressed sales, the Fair Market Value of homes has significantly declined over the last 12 months.  We have witnessed home appraisals ranging from 5% to 30% below tax assessed value.  Since many towns base their tax assessment valuations on sales from the prior year many will not be representative of current market value.  It is important to know this if you are considering selling or refinancing your home.

    Another significant impact to the reverse mortgage industry is the disappearance of the Proprietary Reverse Mortgage.  Historically, 90% of reverse mortgages have been the FHA HECM (Federal Housing Authority Home Equity Conversion Mortgage) reverse mortgage.  Today, almost 100% of reverse mortgages are the FHA HECMs as it is the only option available in most states.  The FHA HECM has been and is more popular for many reasons but primarily due to being federally insured.  The federal guarantees provide safeguards to both the borrower and the lender.  The importance of this is if the home can no longer repay the monies borrowed, the homeowner nor the estate, will be personally responsible.  FHA assures the bank is made whole and no other assets can be utilized for repayment of the loan.  This is why lenders are willing to lend money through the FHA at the low interest rates we are witnessing today.  With a Proprietary Reverse Mortgage the lender still cannot take recourse against the estate, but the lender will have to take a loss itself if the home can no longer repay the loan.  This is a risk lenders are not willing to take in today’s market.  This is why interest rates on the Proprietary Reverse Mortgages are usually higher as the bank has to take on the risk themselves.  The Proprietary market will return, but it will depend on how long it takes the credit markets to stabilize.

  • Welcome to Senior Equity Financial’s Blog!

    Posted on February 10th, 2010
    Craig Phillips No comments

    We would like to welcome you to Senior Equity Financial’s blog. Our goal is to keep you up to date on the reverse mortgage industry, as well as, other topics affecting homeowners and your retirement.  We welcome your feedback or suggestions on topics you may be interested in.  We will do our best to address any questions you have.  Thank you again for visiting our website and we look forward to speaking with you soon.