The number of active reverse mortgage lenders has declined and is predicted to shrink another 35% this year according to Reverse Mortgage Daily with, most notably, Bank of America exiting the market, and Wells Fargo exiting wholesale. Even with these significant changes, the outlook for consumers is encouraging. There will still be enough Reverse Mortgage lenders in the market to keep costs to consumers low due to competition among lenders. For 2011, the Reverse Mortgage industry believes that many more consumers will be flocking to the HECM Saver product over the HECM Standard. This is basically due to the HECM Saver’s advantages of a lower interest rate, guaranteed credit, and payment flexibility.
The challenge for Reverse Mortgage companies in 2011 will be in marketing and presenting the Saver product clearly and effectively to the target audience, while also trying to turn a profit on a product that has lower margins compared to the HECM Standard. Part of the communication challenge for Reverse Mortgage companies will be in overcoming previously held negative perceptions of a Reverse Mortgage by the target audience. It’s hoped that perception can be remedied by supplying consumers with Reverse Mortgage Calculators and giving them access to education to answer questions like what is a Reverse Mortgage. According to Reverse Mortgage Daily, other consumer resistance factors can include the fact that consumers may already owe too much on an existing debt, would rather pay down an existing mortgage instead of refinancing into a reverse (reducing debt is more important than reducing payment), or that they are just complacent and don’t have a pressing need to change.
The response above is not intended to be anything other than the educated opinion of the author. It should not be relied upon as financial advice.