A new study from the MetLife Mature Market Institute shows the age of those seeking a Home Equity Conversion Mortgages (HECM) has plummeted in the four years since the collapse of the housing market in the U.S. The study also finds that reverse mortgages have evolved into a way for many older Baby Boomers to help manage urgent financial needs. Boomers, age 62–64, currently represent one-in-five prospective borrowers of the product, which was once associated with a much older age group.
"Changing Attitudes, Changing Motives: The MetLife Study of How Aging Homeowners Use Reverse Mortgages," produced in conjunction with the National Council on Aging (NCOA), reports that the average age of those who have gone through reverse mortgage counseling has declined and is now 71.5 years of age. The U.S. Department of Housing & Urban Development (HUD) reports a similar decline in the average age of borrowers to age 73. Forty-six percent of homeowners considering a reverse mortgage are under age 70. The percentage of 62- to 64-year-olds who are prospective borrowers has increased 15 percentage points since 1999, despite the fact that younger applicants have had lower available loan limits.
Data for the study was collected by HUD-approved counselors as part of mandatory counseling for all reverse mortgage applicants. Between September and November 2010, counselors completed 21,240 of these counseling sessions. Approximately 67 percent of recent counseling clients also have a conventional mortgage that will need to be repaid if they decide to take out a reverse mortgage, the study found. About 27 percent of the respondents reported having both housing and non-housing debt. Borrowers with sizable existing debt may rapidly deplete home equity.
“Consumer attitudes about reverse mortgages are changing because the recession has eroded confidence about retirement security and Americans will rely more and more on these measures,” said Sandra Timmermann Ed.D., director of the MetLife Mature Market Institute. “As reverse mortgages do not have income requirements and since other forms of credit have become less accessible, these loans will become more attractive, though it is worth noting that the Department of Housing and Urban Development stated recently that lenders may conduct financial assessments of applicants to ensure that they have the ability to meet their loan obligations.”
Barbara Stucki, Ph.D., vice president for home equity initiatives for NCOA, added that going forward there is a good chance home equity will evolve from being an emergency measure to one that is part of a strategic retirement plan.
“While the economic downturn may be a major reason borrowers have begun to use this financial option for debt management, in the future it is likely that tapping home equity will be viewed as part of the entire retirement planning process," said Stucki. "It is likely the reverse mortgage option will be considered alongside some of the more traditional methods of saving and investment.”
