development and industry relations for PHH Mortgage Corp., based in West Palm Beach, FL. Despite the headwinds, industry observers say reverse mortgages have maintained their appeal through 2023. The product offers an attractive way for older Americans to end their mortgage payments and fund their retirement. “My take is going to be the glass half full instead of half empty, and I mean that,” says Loren Riddick, CRMP, national director of reverse lending for Worthington Mortgage Group. On the positive side, Riddick says, payments are optional on a reverse mortgage. And borrowers who choose a line of credit see their credit limit grow faster when rates are higher, he says. “How awesome is it to have a program where the client is hoping that rates go up? A totally different perspective and game-changer, no doubt.” Strong Demographics The Federal Reserve has been steadily boosting interest rates since March 2022 to tamp down what had been record levels of inflation. However, many observers expect the upward march to end in 2024 and perhaps even reverse course, depending on the state of the U.S. economy. Analysts have been expecting a recession at some point, and some see one coming in 2024. Researchers at rating firm Moody’s, for example, are forecasting a mild recession next year triggered, in part, by tighter loan standards from banks. According to the National Association of Realtors (NAR), the average rate on a 30-year fixed mortgage is forecast to drop to six percent in 2024, after topping seven percent at times in 2023. But while rates and the economy may fluctuate, demographic and personal finance factors that play into the reverse mortgage market remain relatively unchanged. Baby Boomers continue to age, and many Americans are saving too little for retirement. According to a June study by financial services firm Northwestern Mutual, for instance, Americans believe they will need $1.27 million for a comfortable retirement. However, the average American has only $89,300 in retirement savings. Even Americans close to or in retirement—those in their 50s, 60s and 70s—have less than $150,000 saved, on average, according to the report, Northwestern’s 2023 Planning & Progress Study. COVID-era stimulus payments and a decline in travel spending helped many seniors stretch their savings over the past several years, says Chris Mayer, CEO of Longbridge Financial. “Over time, however, as people have gotten back out to live their lives and the impact of inflation has become more pronounced, potential borrowers are coming back to look at their home as a source of retirement funds.” Waiting for the Bounce Soaring home prices have challenged the forward mortgage industry and slowed sales. But reverse lenders say higher prices have offered an opening for the reverse side. Homeowners, for example, can use a reverse mortgage to lock in their home’s current value as a hedge in case prices eventually go south. “What goes up can come down,” says George Downey, CRMP, a reverse mortgage lender and regional senior vice president for The Federal Savings Bank based in Chicago. Indeed, home prices started to fall this year, according to data from the Federal Reserve Bank of St. Louis. In the second quarter of 2023, the median sale price in the U.S. was $416,100, down from $479,500 at the end of 2022. Still, prices are up significantly from their pre-pandemic levels. In the first quarter of 2020, the median sale price was $329,000. Nonetheless, given the decline in HECM proceeds and the relatively high upfront costs, many would-be borrowers are deciding to wait, lenders say. “That’s been a little frustrating to me. But at the same time, I understand it,” says Jimbo King, CRMP, owner of McGowin-King Mortgage, a reverse originator in Birmingham, AL. Loren Riddick Adapting: Part 2 continued on page 26 Michael Kent REVERSE MORTGAGE / NOVEMBER–DECEMBER 2023 25
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