Linking reverse mortgages to subprime is completely unfounded says executive

NewImage.jpgWith recent reports indicating that property values are leveling off in some areas of the country, Scott Stern, chief executive of Lenders One told Broker Universe he believes things could be turning around for reverse mortgages.

With prices stabilizing, it will make it easier for seniors to determine their equity position in their property and then go ahead and borrow.  Among the causalities in the reverse mortgage business because of the tough economic times are the products that competed with the Federal Housing Administration’s Home Equity Conversion Mortgage.

“My initial sense is this should be a government loan, to insure the safety and the sanctity of the product,” especially because the product relies on the equity that seniors have in their homes, he explained. Therefore there needs to be proper regulation, but he could see a private-label market for reverses if their was appropriate oversight.

Another issue that might be having an impact on volumes is a number of consumer advocates, regulators, and politicians who have tried to link reverse mortgage lending with subprime lending.  “My opinion of that is that it is completely unfounded, when using a regulated reverse mortgage product,” he said. When one is talking about a consumer’s ability to generate income to take care of their living expenses, there needs to be an evaluation of and comparison to, other sources of revenue.

Still, Lenders One is bullish on the future of reverse mortgages as the baby-boomer generation gets older and taking into account his earlier points about stabilizing property values and consumer trust.  “There should be a strong reverse mortgage market in 2010 and 2011,” he said.

While admitting not knowing the answer on how to increase the market penetration of reverse mortgages, Stern had a few thoughts on the subject.  Read them at the link below.

Property Value Improvement Should Help Volume

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