There is still one area of the mortgage industry that is beyond red-hot right now -- worth covering because of how poorly the rest of the mortgage market is performing. Reverse mortgages are white hot, and a good number of loan officers have been looking into reverse mortgages as a way to keep afloat as the rest of their residential business has gone kaput. From the Wall Street Journal:
Only a year ago, homeowners interested in reverse mortgages had little to choose from beyond the plain-vanilla, government-backed products that have long dominated the market. Such mortgages essentially allow homeowners at least 62 years old to sell a large chunk of their home equity back to a bank or other lender in exchange for a lump sum, monthly payments or a line of credit. Now, nearly a dozen large banks and mortgage lenders have launched reverse-mortgage products with lower fees and larger payouts. One lender has reduced the minimum age requirement to 60; others are making loans on second homes and vacation rentals. "Jumbo" reverse mortgages -- for houses valued at as much as $10 million -- are becoming more common ... The product is evolving from meeting basic needs to fulfilling the desires of a new generation of retirees, from funding a vacation getaway or a recreational vehicle to renting a Paris pied-a-terre. The new options, though, mean more potential for confusion among consumers -- and a bigger chance that they could miss out on getting the best loan for their situation.
By "basic needs," the WSJ should have noted that reverse mortgages were once primarily a tool used to keep from foreclosing on an old retiree. But it appears that the drive for industry innovation has finally arrived to the grey-haired -- reverse mortgage fundings have surged 41 percent through the end of September, according to HUD statistics. And what's been driving the growth in reverse mortgages? A group of investment banks, outfits like Lehman, that have decided they're willing to buy reverse mortgages so they can eventually securitize them. The emergence of a private party market has led to a proliferation of new reverse mortgage "products," so this market segment is no longer constricted to the arcane standards of someone like, say, Fannie Mae. Well that, and the fact that Granny and Gramps want to go to the Bahamas. Update: Right on cue, Bank of America has issued a press release touting the expansion of its reverse mortgage program into the Southeastern states. BofA offers its own private-party reverse mortgage program called Senior Equity Reverse Mortgage Platinum, a proprietary product first introduced in Arizona last year, which offers lower fees than government products and is available for home values up to $10 million.