Jan/Feb 2023 RMM

Future of Refinancing When interest rates were low, many lenders feasted on a high volume of HECM-to-HECM refinancings. While the impact on the reverse industry was complex, the transactions ultimately gave seniors an opportunity to tap into additional equity in their homes, Kent says. The refinancing boom also may have ushered in a “new normal” that resembles what happens in the forward world when rates fall significantly, he says. The challenge for the reverse industry is to price in refinancing so the original lender can profit from the transaction, Mayer says. He cites the example of the U.K., where originators establish a longer-term relationship with senior borrowers, allowing the latter to draw out additional equity when home prices rise. It may be some time before the next refinancing boom, however. The Federal Reserve hiked interest rates throughout 2022 and expects to keep rates higher in 2023. Policymakers are seeking to curb inflation, but the rate increases also pose a risk to the wider economy. Despite the headwinds, CEOs say, the larger economic picture can work to the advantage of reverse mortgages. Many seniors lack adequate retirement savings, and some are even carrying debt into their golden years, according to Mayer. Those debt payments have an impact. When mortgage payments end, according to a study cited by Mayer, people increase spending on prescription drugs by 25 percent. “The way to think about that is they were cutting back on drugs to make their mortgage payments—and that’s the average person,” Mayer says. “It’s really clear that we’re talking about a population with not a lot of savings and a home that can serve as a base to help.” American Advisors Group NMLS# 9392 (www.nmlsconsumeraccess.org). AAG is headquartered at 18200 Von Karman Ave., Suite 300, Irvine, CA 92612. For complete disclosure information, visit https://www.aag.com/ legal-information. These materials are not from the U.S. Department of Housing and Urban Development (HUD) or the Federal Housing Administration and were not approved by HUD or a government agency. REVERSE MORTGAGE / JANUARY–FEBRUARY 2023 27

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