RISMEDIA, November 2, 2009—Golden Gateway Financial, a comprehensive financial resource for seniors and retirees recently released new usage data from its online Reverse Mortgage Calculator that showed falling home values continue to negatively impact the amount of money available to older Americans through a reverse mortgage. At the same time, the company also reported a dramatic increase in the number of individuals who have researched reverse mortgages in the past 90 days.
Over that time period, the number of seniors using the company’s online calculator has increased nearly 90% from the previous quarter. This significant increase in older homeowners researching a reverse mortgage mirrors the growth in reverse mortgages overall.
This increase is also likely driven by conditions in the marketplace that are reducing the amount of money seniors can gain through a reverse mortgage. Many then are seeking relief now to maximize their equity. These factors include new HUD (U.S. Department of Housing and Urban Development) regulations that slashed reverse mortgage proceeds by 10%, a continued decline in self-reported home values and federal legislation whose expiration at the end of this year will significantly reduce reverse mortgage limits even further.
“Older Americans continue to feel the lingering effects of the recession more than other segments of the population and a growing number of them are actively looking for ways to generate additional cash in retirement,” said Eric Bachman, founder and CEO of Golden Gateway Financial. “Unfortunately, these individuals stand to lose even more leverage and equity in their own homes when the temporary increase on mortgage limits expires at the end of this year. Seniors need this higher limit renewed as another tool that can help them find their financial footing.”
Recent HUD regulation changes resulted in an across-the-board 10% reduction in reverse mortgage proceeds available to seniors. At the same time, seniors are reporting a growing decline in their estimated home value. While the latest S&P/Case-Shiller Home Price Indices highlights a slowing drop in home values across the country, seniors seem to be gaining momentum. The decline in senior home values was reported at 1.4% between the first and second quarters of this year, but it dropped steeply to nearly 10%, or an average loss of almost $40,000 between the second and third quarters of 2009.
This is troubling for seniors because the amount of money available through a reverse mortgage is directly tied to the value of their home and the equity they hold in it. Further compounding this reduction in available equity is temporary legislation that increased reverse mortgage limits to $625,500. When this expires at the end of 2009, limits will fall back to $417,000, further reducing the amount of reverse mortgage proceeds available to borrowers.
Additional observations from the data include:
-The average age of users remained roughly consistent
-Self-reported senior home values dropped nearly 10% by almost $40,000 between the second and third quarters of 2009
-The median reported home value dropped below $300,000 for the first time in more than a year
-The average existing mortgage debt fell by approximately $8,000 from the previous quarter
Reverse Mortgage Calculator National Averages
Q1 ’09 Q2 ’09 Q3 ’09
Average age 69.5 69.3 69.4
Average home value $413,371 $407,557 $369,762
Median home value $300,00 $300,000 $270,000
Percent with existing mortgage 49.9% 49.8% 51.3%
Average existing mortgage debt $161,265 $152,455 $144,497
Average max up-front payment $143,872 $151,089 $136,711
Average max monthly payment $922 $1097 $993
For more information, visit www.goldengateway.com.