Reverse Mortgages = Subprime? Unfortunate Comparison says HUD Economist

What seems like an increasingly negative impression of the reverse mortgage business – among some consumers, media outlets and government representatives – has several practitioners wondering what can be done to counter these beliefs – and who might take the lead in such an effort. One reverse originator reportedly has asked an industry trade association to collect special fees from members to mount a counter-offensive, including but not limited to a significant marketing campaign.

It seems that subtly yet powerfully, there even has developed a growing notion that the reverse mortgage business is akin to (now-discredited) subprime lending, which is blasphemed for a wide-range of ills, not the least sparking a worldwide recession.

“It’s an unfortunate comparison,” asserts Ed Szymanoski, noted economist with HUD, in conversation with RMD. He points out that the FHA, principal guarantor for nearly all reverse mortgages today, “has lot of protections built in.”

Jeff Foody agrees. He is corporate education liaison, EquiPoint Financial Network, and regards any equation of reverse mortgages to subprime as nothing more than “sensationalism. People fear what they don’t know,” he says. Foody figures reverse mortgages have been “obscure for some time, so it’s easy to make [false] comparisons.”

One secondary market trader adds that the two mortgage sectors are “not anything at all alike. Reverse is all government-based lending, no one can compete on LTVs, and the rates are floored,” he points out.

Neil J. Morse has been a communications professional working in the mortgage finance industry for more than a decade, currently specializing in the reverse mortgage sector. He can be reached at [email protected]

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