There is news everywhere of recession indicators like the inverted yield curve, historically low unemployment, historically high oil prices, rampant inflation, and more. At the same time there is an uptick in reverse mortgage loan activity in not only my business but in the entire United States. Why is this happening?
To qualify for the FHA’s Home Equity Conversion Mortgage (HECM), aka Reverse Mortgage Loan, you need at least one borrowing spouse to be 62 years of age or older at the time of closing. There are other private or proprietary reverse mortgages that are offered by the largest reverse mortgage lenders, and some of them allow for the youngest borrower to be at least 55 years old.
Either way, most people who are old enough to qualify for a reverse mortgage are on a fixed income or will soon be on a fixed income. Some examples of fixed incomes are social security income, pensions, retirement, etc. Inflation is rampant, and the cost of everything has been going up at an alarming rate since the pandemic. One can argue which factors are the biggest players in contributing to the inflation. You can blame the massive money printing, the supply chain issues, or the war in Ukraine, but in the end inflation is here and has caused the cost of living to go up dramatically.
Basic knowledge of finance will tell you that if you are living on $1,500 per month or $15,000 per month, and your cost of living has gone up by, say, 20%, then it is just like having your income cut to $1,200 or $12,000. Because your purchasing power has gone down by that same 20%
We are finding that people of reverse mortgage age are turning to this product like never before. Why do I say “like never before”? Because the “baby boomers” are now the reverse mortgage age generation. They are not as skeptical as the “silent generation” was (or is) before them. Let us also remember we now have the highest home values in history, and the reverse mortgage loan is all based on the appraised value of the home. With higher home values and the greater acceptance of the reverse mortgage loan as being a viable mortgage product with features that allow for living a better retirement, it is becoming a viable solution to combat inflation while entering a recession in, possibly, 2023 or 2024.
Written by Phil Stevenson, CRMP
Owner & Principal MLO of PS Mortgage Lending, 1 of less than 200 Certified Reverse Mortgage Professionals (CRMP). Phil was interviewed and featured in Forbes 3 times since 2015 and has been offering reverse mortgage loans since writing one for his grandparents in 2008.
Recession indicators link to my YouTube videos