WASHINGTON — The trend toward reverse mortgages has, well, reversed.
Reverse mortgages, which allow long-time homeowners to tap the equity in their homes and to remain in the property until their deaths, had been seeing a surge in growth. According to the Federal Housing Administration's HECM program, in the year ended Sept. 30 some 114,692 reverse mortgages had been underwritten, an increase of 1,336% compared with 1999. Five years ago, just 43,000 reverse loans were funded.
Many lenders saw reverse mortgages as a safe harbor. But analysts are now suggesting that growth will slow considerably as the result of government underwriting guidelines that went into effect Oct. 1. A survey released by the National Reverse Mortgage Lenders Association found that of the loans booked to date in 2009 by the three largest portfolio lenders of reverse mortgages, had the new underwriting guidelines been in effect all year, one out of five HECM borrowers would have been unlikely to qualify for their loans because the home equity available to them would have been less than what was owed on the property.
Many homeowners, the NRMLA is reporting, are disappointed to discover the value of their home is considerably less than they had thought.
