Reverse Mortgages Open Up A New Market

CUs offer reverse mortgages to house-rich, cash-poor members.

October 19, 2011

For years, reverse mortgages were an option for struggling older consumers. But that ended across the country when unscrupulous lenders ruined the product's name.

Now, with seniors facing difficult financial situations nationwide, credit unions are finding reverse mortgages might be the best option to serve many of these members who are house-rich and cash-poor.

It's important that credit unions offer reverse mortgages to consumers. If they fail to do so, seniors who could benefit from accessing their home equity might be unable to find a lender, or might find only lenders that fall short on the education vital to help seniors apply for the right loan for the right reason, according to Tom Walker, president/CEO, MEMBERS Trust Co.

By offering reverse mortgage programs, credit unions not only meet a significant member need, but they also expand their product and service repertoire.

Take note of these issues and opportunities experts see with reverse mortgages:

  • Financial assessments. Jeff Lewis, CEO of Generation Mortgage, Atlanta, predicts the reverse mortgage industry will require a financial assessment of the borrower’s ability to fulfill their responsibilities, including property taxes, homeowner’s insurance and home maintenance, starting before year-end 2011.
  • Foreclosure concerns. Bank of America’s and Wells Fargo’s reasons for ending reverse mortgages programs included rising foreclosures due to unpaid property taxes and homeowner’s insurance. Vendors and credit unions suggest helping seniors address these obligations with designated savings accounts or escrow accounts, depending on how the reverse mortgage is structured.
  • Demographics. As the baby boomer generation reaches retirement age, reverse mortgages could move from a novelty product to a new market for credit unions, according to Mike Kent, senior vice president, Reverse Mortgage Solutions Inc., Spring, Texas. “It’s a growing market, driven by inexorable demographics.”
  • A family relationship. Tom Werder, national director, strategic partnerships, Genworth Financial Home Equity Access Inc., Rancho Cordova, Calif., says reverse mortgage decisions involve both seniors and their family members. That creates a unique opportunity for credit unions to reinforce their role as trusted adviser and enhance relationships with members.

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