Bright Future for Reverse Mortgages?
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A story in the Winston-Salem Journal (Mortgage lenders plan new strategy) notes that reverse mortgages may take on a larger role in mortgage banking activity as lenders deal with the fall-off in traditional mortgage lending caused by rising interest rates:
At the same time, lenders are expecting the baby-boomer generation to borrow money with reverse-mortgage loans that allow them to cash in on their home equity. Although previous generations of homeowners have looked to pay down their debts going into retirement, the baby-boomer generation is seen as more comfortable with taking on debt in its retirement years.
According to the Mortgage Bankers Association, a survey of 110 mortgage-banking companies found that demand for reverse mortgages rose 28 percent in the first six months of 2005 from the second half of 2004.
"Reverse mortgages will be a growing product," said Ray Morris, the director of business development at GMAC Mortgage Corp. "Baby boomers will opt for the reverse mortgages. Sold to the right people, it is a great product."
It’s hard to find fault with this analysis. Demographic and market forces certainly seem to point to strong growth potential for the reverse mortgage market. A key will be whether baby-boomers comfort level with debt continues into retirement and whether the potent psychological forces that have inhibited broader use of reverse mortgages to this point remain a factor for this generation. We’ll take a look at some these psychological forces in a future article.
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