Scott Norman serves as vice president for the Texas Mortgage Banker's Association
(TMBA). He has navigated the reverse mortgage business for the last 10 years and helped put together TMBA's reverse mortgage forum, which takes place in August at the Driskill Hotel in Austin.
In this episode of In This Corner
, Scott Norman discusses the future of the mortgage industry and the ability of Texas' market to recover.
HW: Was Texas shielded from the housing bubble because it avoided over-inflating its housing prices, and does it look like this market will have an easier time recovering than others?
Scott: "Without question, Texas was shielded from the housing bubble. While our markets have seen numerous soft spots, we should recover quicker and stronger than most. As in the past, residential real estate and job growth will lead the way. By the year 2030, the Texas population is expected to grow by an additional 14m to 38m. Also of note, Texas hosts more Fortune 500 companies than any other state. Our diversity, when it comes to education and job creation, are second to none."
HW: With HVCC and RESPA, to name a couple of new policies, it seems like we’re in the age of regulation when it comes to housing and the way mortgage lenders operate. Do you see tightened regulation harming or helping the housing industry?
Scott: "While there is always a fear that overregulation may stifle competition, I don't see the new regulations hurting the reverse mortgage industry. In fact, one of the best aspects of a reverse mortgage are its numerous consumer protections. Probably the most important protection is the requirement that all prospective borrowers receive independent third party reverse mortgage counseling from an approved HUD counselor prior to taking a loan application. In addition, there is a limitation on closing costs and all borrowers must receive an advance disclosure showing the total transaction costs over the projected life of the loan. Also, there is not a penalty for canceling the loan after closing, i.e. the three-day right-of-rescission period."
HW: What are the financial advantages of a reverse mortgage for senior citizens?
Scott: "For a majority of Americans, their home's equity is their biggest asset. A reverse mortgage allows homeowners, age 62 and over, the ability to convert part of their equity into tax-free income without having to sell the home, give up title, or take on a new monthly mortgage payment. The reverse mortgage is aptly named because the payments are 'reversed.' Instead of making monthly payments to the lender, as with a traditional mortgage or home equity loan, the lender makes payments to you.
"You can access your funds for any reason -- health care, home improvement, prescription drugs, a new car or even to help pay for a grandchild's education. With interest rates below 5.6%, there has never been a better time to look at the options associated with a reverse mortgage."
HW: New packages and products are entering the fold of the reverse mortgage portfolio. What does the future of reverse mortgages look like?
Scott: "The most exciting thing about reverse mortgages is what the future holds. As more Americans are forced to cope with the rising cost of health care, reverse mortgages will continue to take on a greater significance in the retirement landscape.
"When you look at the demographics, you quickly see that issues like affordable senior housing and long-term care will become mainstays in the American retirement debate. There are over 34m Americans over the age of 65. This is expected to double in the next 30 years to almost 70m. In the next 20 years, nearly one in five Americans will be over age 65. Approximately 80% of seniors own their own homes, meaning there are 27m senior homeowners today.
"I anticipate the newly enacted Congressional changes to reverse mortgages, including higher lending limits, stricter consumer protections, and lower fees will lead to even more acceptance in the coming years. The overwhelming growth we’re seeing reinforces our belief that reverse mortgages remain a safe and viable option for American seniors as they assess their retirement plans."
Write to Jon Prior