The latest figures as of the end of April on the number of Reverse mortgages that have been done, is already 18% over last year. If this trend continues than this will be a banner year for the origination of the government insured loan.
And the reasons are obvious. Seniors need to supplement the income that they have lost in their investments and a Reverse loan is an easy solution.
Originally the HUD lending limit was determined by the average cost of housing in each county in the United States. That tended to be unfair for many individuals if their home’s value was higher than the limit for their county and that shut out many potential Seniors from the program.
HUD changed this guideline via the Stimulus package and now there is a single limit of $625,500 throughout the country. This has opened the “gate” so to speak, by allowing more Seniors to take advantage of the loan program and supplement their income and they are becoming less hesitant to do so.
If this trend should continue throughout this year, I feel that we will see a record number of new loans and the only issue that could prevent that from happening, would be the value of the subject property.
In some cases, Seniors opted to do Stated Income loans in order to pull cash out from the property to make their monthly expenses. And this has tended to be a problem for some Seniors applying for a Reverse loan, because their payoff might be too large to be covered by the funds from the Reverse mortgage and they are unable to do the loan unless that have the funds to cover the shortage.
Hopefully we will start to see the market turn around and their are indications that, that is beginning to happen in certain parts of the country. As the lower end of the market starts to see some sells, it will trickle upwards, increasing property values in communities.
If you wish to hear me discussing this on a recent radio interview, please follow these instructions:
www.kvta.com Click on the “Locals Only” tab. I was interviewed on May 19th and you may listen in.