Retirement Research Center: Seniors Need Home Equity Access

Despite the many challenges reverse mortgage products face, including the recent exits of large bank lenders from the industry, seniors need an option that allows them to tap their home equity, says an editorial from the director of Boston College’s Center For Retirement Research. The house is a crucial component of most households’ assets, the editorial continues, and accessing home equity will become increasingly important as retirement needs are on the rise.

The editorial stresses the need for a reverse mortgage-like option for seniors at a time when the retirement system is contracting, with Social Security replacement rates declining, higher heath care costs and people living longer.

It also addresses the issue of the HECM Saver as a valuable tool with lower upfront costs, and states that reverse mortgages have received bad publicity due to aggressive salesmen persuading borrowers to invest their loan proceeds in inappropriate products. Despite the negative press, Munnell writes, households will need this product.

But the tough economic time is making it difficult for the products to gain steam, Munnell writes. “No bank wants to be forced to foreclose on a vulnerable elderly homeowner.” Additionally, she says, declining home prices are making it tougher for borrowers to qualify.

“We need some creative thinking to design a better mousetrap that will enable retirees to tap the equity in their home,” Munnell writes. “They are going to need the money.”

Read the article on SmartMoney.

Written by Elizabeth Ecker

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