Mortgage Industry Trends

When the thought first entered our minds to open our own reverse mortgage consulting business we told ourselves we were crazy, but you know how an idea plants itself in your head and no matter how hard you try you just can’t shake it.  What did it for us was that we finally found something we could be passionate about.  After originating, processing, underwriting, and setting up reverse mortgage divisions we were in love.  There was a problem though, the more we talked to our friends and colleagues in the industry the more it became clear that no one knew a thing about reverse mortgages.

The statistics are staggering when it comes to the growth potential of reverse mortgages.  Everyday 40,000 people in the United States turn 62 (the minimum age of the product) they hold an estimated 4 trillion dollars of untapped equity.  Let me say that again 4 trillion dollars!  On average they hold the most equity and have the least income over any other age group.  They are what we call “House rich and Cash poor”.  This demographic is crying out to be helped, some of them only bringing in $600.00 per month in social security while sitting on a house that is free and clear and worth over $200,000.  I have given seminars to seniors where they just bow their head and cry.  They have finally found a solution to their financial problems without having to burden their families or friends.  This product is all about giving our seniors a better quality of life.  Letting them live out their golden years in comfort and with the money to do the things they have always wanted to.

Let me explain the reverse mortgage basics here for those of you who have heard of them but haven’t yet looked into the product.

• A reverse mortgage is a special type of home loan that allows the borrower to convert a certain amount of their home equity into cash.  With a traditional second mortgage, or a home equity line of credit, you must have sufficient income versus debt ratio to qualify for the loan, and you are required to make monthly mortgage payments. The reverse mortgage is different in that it pays you, and is available regardless of your current income. The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA's mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, and the lower the interest, the more you can borrow. You don't make payments, because the loan is not due as long as the house is your principal residence. Like all homeowners, you still are required to pay your real estate taxes and other conventional payments like utilities, but with a Reverse Mortgage, you cannot be foreclosed or forced to vacate your house because you "missed your mortgage payment."

Ok, now that we have the preliminaries out of the way let me tell you why we are so excited about the reverse mortgage product.  Working for wholesales lenders we were in contact with brokers every day.  We were hearing their frustration over the past year and it was only getting worse, less qualified borrowers, less programs, less lenders, etc.  They were our friends, they were struggling and it was hard to watch.  While we could not offer them the instant wealth of the sub prime mortgage boom we could offer them something even more valuable, the opportunity to replace that unstable income stream with a reliable, growing one.

Take a look at the recent reverse mortgage activity.  In 2005 44,000 reverse mortgages were written while in 2007 over 100,000.  Just in that time the number doubled, seems impressive right? Think about it this way, how many forward mortgages were written over the past two years, millions!  This product is in its infancy and brokers that are getting involved now are developing huge market shares.  Brokers from all around the country are calling us to get set up and trained so they can offer this innovative product to their clients, they see it as we have, a valuable tool to generate income from a customer base that has been left out by the recent real estate boom.  While the mortgage offerings seem to get smaller and smaller everyday this is a great new product that T & J Consulting Firm believes every broker should take advantage of.

On our next blog offering we will be discussing the different types of reverse mortgages on the market, from HECM to those jumbo proprietary loans.  With new products being developed everyday we will keep you up to date on everything Reverse Mortgage.  If you would like to contact Tracie or me email us at jarogoff@hotmail.com or tagressmen@hotmail.com.