One Segment of the Mortgage Industry Doing Quite Well
It seems I don't even need to check the morning paper anymore, because I already know what it will say.... "Credit & mortgage Crisis worse than expected, recession deepens, and basically the sky is falling".
I have friends in the mortgage industry from Seattle to Phoenix and east into Texas. All of their respective mortgage businesses are down. Some are down as much as 75%.
One common denominator of those crying the blues is that they are all in the forward mortgage segment of mortgage lending. On the contrary, reverse mortgages are booming.
The question is why? First, since banks on the forward end are so hesitant to lend out money one can see how a reverse mortgage, which does not require monthly interest or principal payments, might be a healthier investment for a bank or the banks investors.
The one real risk to the reverse mortgage involves a negative equity position for the bank. To combat this the bank lends with relatively low loan to value ratios, which in turn give it the security its investors desire to fund the loans.
Adding to the recipe, the over 62 market is growing like a weed. Many demographers believe the over 62 population will double by the year 2030.
Furthermore, with the ever increasing cost of living and this group's propensity to save less than its parents, the need for additional income will persist.
I haven't looked at the exact numbers of how much the stock market is down, but many seniors are running scared because of it. Many of my new reverse mortgage applications have been predicated on this.
You can imagine how this group feels. The proverbial rug has been pulled out from under them, and they are groping for some financial tool to create some feeling of safety.
Where things go, economically, in the coming years in anyone's guess. Home values are falling with no real end to the recession in sight.
The real nemesis to the reverse mortgage industry is home values reducing radically. Outside of this fairly unlikely occurance it seems the future looks bright.
I have friends in the mortgage industry from Seattle to Phoenix and east into Texas. All of their respective mortgage businesses are down. Some are down as much as 75%.
One common denominator of those crying the blues is that they are all in the forward mortgage segment of mortgage lending. On the contrary, reverse mortgages are booming.
The question is why? First, since banks on the forward end are so hesitant to lend out money one can see how a reverse mortgage, which does not require monthly interest or principal payments, might be a healthier investment for a bank or the banks investors.
The one real risk to the reverse mortgage involves a negative equity position for the bank. To combat this the bank lends with relatively low loan to value ratios, which in turn give it the security its investors desire to fund the loans.
Adding to the recipe, the over 62 market is growing like a weed. Many demographers believe the over 62 population will double by the year 2030.
Furthermore, with the ever increasing cost of living and this group's propensity to save less than its parents, the need for additional income will persist.
I haven't looked at the exact numbers of how much the stock market is down, but many seniors are running scared because of it. Many of my new reverse mortgage applications have been predicated on this.
You can imagine how this group feels. The proverbial rug has been pulled out from under them, and they are groping for some financial tool to create some feeling of safety.
Where things go, economically, in the coming years in anyone's guess. Home values are falling with no real end to the recession in sight.
The real nemesis to the reverse mortgage industry is home values reducing radically. Outside of this fairly unlikely occurance it seems the future looks bright.
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posted by Credit Counseling at
10:44 PM
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