Chart of the Day: HECM Fixed Attracts Younger Borrowers, Increases Risk to FHA

The latest in our Chart of the Day series comes from Reverse Market Insight and shows how younger borrowers are turning to the HECM fixed product more than the adjustable rate reverse mortgages.

According to RMI, the average age for adjustable rate borrowers was 73.6 compared to 71.7 for fixed rate borrowers in 2009.  With younger borrowers withdrawing all of the proceeds upfront through the fixed rate product, are they increasing the risk to the Federal Housing Administration?

“If I was HUD, I would be worried about the fixed rate product’s full draw requirement distorting the market to begin with,” said John Lunde, President of RMI in an email to RMD.  “The principal limit factors are set assuming that people don’t take all upfront, but draw over time as they historically have.”

As of January 2010, fixed rate reverse mortgages grew to 68.28%, up from only 3.9% of endorsements a year earlier.  A previous Chart of the Day showed how the products are dominating the marketplace.


For a larger version of the chart, click here.  To see more analysis click the link below.

Reverse Mortgage Borrower Analysis, Part 2

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