| Reuters
Many retirees haven't saved enough to cover expenses for the rest of their lives. But many of them have one major asset - a home. A reverse mortgage allows them to borrow against that, and they don't have to make any payments on the loan until they move or die.
Borrowers took out $15.3 billion of the loans in 2013, an increase of 20 percent from the year before, according to industry publication Inside Mortgage Finance. The record year was 2009, when there were $30.21 billion of reverse mortgage loans made.
Brokers and bankers say the 77 million retiring baby boomers will likely help fuel further growth in the loans in the coming years, making the business a growth spot in a home loan market where volumes have recently been declining.
But at this stage, most bigger lenders are uncomfortable with the loans — for example, in 2011, Wells Fargo & Co and Bank of America backed out of the business. Wells has cited factors including unpredictable home values and the level of delinquencies as reasons for it to stay away from reverse mortgages.
The government agency that guarantees these loans, the U.S. Federal Housing Administration, found them to be risky, too. Losses on reverse mortgages were a big reason for the agency's $1.7 billion taxpayer bailout last year - and some experts worry it could end up in similar trouble again.
No comments:
Post a Comment