As Americans grapple over where to live as they grow older, a recent meeting of aging and retirement experts hosted by the Urban Institute, a Washington, DC-based think tank, highlighted the need to think about both aging in the right place and how to pay for it.
In a blog post chronicling the meeting, Urban Institute Research Associate Karan Kaul said the Home Equity Conversion Mortgage program is often the only option for homeowners with limited incomes and savings to monetize their home equity and improve retirement finances. However, HECM remains underutilized due to negative perceptions about costs, product complexity, fear of foreclosure or getting scammed.
Meeting participants agreed that there was a sense of urgency for stabilizing and improving HECM by doing the following:
- lowering costs associated with servicing HECM loans and introducing a lower loan-to-value ratio;
- offering a lower-cost product for households that want to borrow a limited amount (for instance, to pay for home safety retrofits); and
- encouraging the return of the private reverse mortgages, a product several lenders have recently relaunched.
Kaul questioned whether these fixes would be enough. “Some in favor of HECM’s current model prefer targeted changes to address issues like post-assignment servicing. But others favor a fundamental reform of the program to make sure it is servicing those who need it most.” He concluded, “Doing nothing will only make the situation worse as more Americans reach old age.”