TREND EMERGING IN REVERSE MORTGAGE INDUSTRY
January, 2000 by James M. Woodard An interesting trend is emerging in the reverse mortgage industry. It could result in more seniors taking advantage of this method of boosting their income. A reverse mortgage is a very special type of mortgage loan, now available to senior homeowners - usually over age 62. It allows them to tap the equity accumulated in their home to arrange for a mortgage loan. But instead of making monthly payments on the loan, the senior receives a check from the mortgage company every month. And those payments can continue for the senior's lifetime, or until the house is sold. In some cases, the reverse mortgage produces a lump sum payment or a line of credit for the senior. But most seniors prefer a steady monthly payment, preferably for life. The new wrinkle in the marketing of reverse mortgages is the increasing involvement of "baby boomers" - the offspring of senior homeowners - in the decision whether or not to apply for such a plan and subsequent processing of the application. In recent weeks and months, more lenders are reporting the active participation of offspring who are helping their parents maintain a high standard of living. They see a reverse mortgage as a viable plan that will help achieve that goal. In one case, a lender reported a recent loan closed for a senior who was actively assisted by her daughter. She took responsibility for explaining the benefits of the reverse mortgage to the parent, accompanied the parent to the counseling session, and ultimately played a major role in determining whether the parent should apply for the loan. This appears to be a significant new trend in the reverse mortgage field. In fact, some lender firms are reporting significantly greater origination volumes in cases where an offspring is involved in the decision process. That, in turn, is changing the marketing strategy of many firms that offer reverse mortgages. They now target offspring of seniors, in addition to seniors themselves, in advertising and printed materials. "I think this is a trend that will benefit our industry greatly," said Dennis Pigg, Sr., president of Safeway Mortgage, Inc. "Of the last six deals I've closed, four came from kids who wanted to get a reverse mortgage for their parents. "My guess is that these kids are running out of resources to supplement mom and dad's income. They believe the reverse mortgage can provide some assistance." In the past, seniors have usually been the ones to initiate the process of getting a reverse mortgage - obtaining information and going to counseling and the loan closing. Their children played a minimal role, if any. Their adult children often live too far away to be of much help. Or, in some cases they oppose their parents' decision to obtain a reverse mortgage because it may mean they won't inherit the family home down the road. However, most baby boomers (children of senior homeowners) believe their parents' well-being is more important than inheriting the family homestead, lenders report. "They want to help their mom and dad to remain financially stable," one lender said. "Most of these baby boomers are very smart. They grasp the reverse mortgage concept more quickly and do a lot of research before they decide whether it's a good deal for their parents. Most of them tend to focus more on mathematics to determine what the balance will be 5 to 10 years in the future, which most seniors don't do." The above quotes were carried in the "Reverse Mortgage Advisor," a publication of the National Reverse Mortgage Lenders Association. | 
