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NRMLA: Reverse Mortgage Volume Up 77% for Fiscal 2006
By James Comtois
With home values on the rise, sales forces growing, consumer acceptance increasing and with a large number of Baby Boomers turning 62, the number of federally insured reverse mortgages made in the U.S. in the fiscal year 2006 grew by 77%, according to the National Reverse Mortgage Lenders Association.
The NRMLA is a Washington, D.C.-based organization that was established in 1997 to help educate consumers about reverse mortgages, training lenders to be sensitive to the needs of older Americans, developing best practices and a code of conduct to ensure lenders treat seniors respectfully and promoting reverse mortgages in the media.
According to the NRMLA, during the most recent federal fiscal year ending September 30, the Federal Housing Administration insured 76,351 Home Equity Conversion Mortgages compared to 43,131 the prior year.
The Santa Ana, Calif., metropolitan area displaced Los Angeles as the top reverse mortgage market in the country with 5,825 loans funded (compared to 3,067 in 2005); followed by Los Angeles (5,758, compared to 3,915 in 2005); Sacramento, Calif. (3,625, compared to 2,161 in 2005); Coral Gables, Fla. (3,577, compared to 1,387 in 2005); San Francisco, Calif. (3,353, compared to 2,040 in 2005); New York City (2,492, compared to 1,454 in 2005); Fresno, Calif. (2,461, compared to 942 in 2005); Phoenix (2,438 compared to 720 in 2005); Boston (2,263 compared to 1,148 in 2005); and Denver (1,947 compared to 1,515 in 2005).
NRMLA attributes the explosive growth to several factors, including high home appreciation rates in many parts of the country, which allow seniors to access greater amounts of equity; more lenders offering the product (NRMLA now represents about 500 firms nationwide compared to 370 last year at this time); and greater acceptance of reverse mortgages as a wealth management tool.
Peter Bell, president of NRMLA, said that reverse mortgages are growing in popularity because the alternative retirement tools aren't cutting it anymore.
"More seniors are recognizing that traditional retirements tools, such as IRAs, pensions, and 401(k)s are not providing sufficient income to help fund everyday living expenses and healthcare," he said. "Through proper education, more retirees are recognizing that the home they have lived in for so many years can now take care of them by using a reverse mortgage to access the equity accumulated over 20, 30, 40 years, to help them living more comfortably."
Brian Montgomery, who serves as FHA Commissioner and Assistant Secretary of Housing at the Department of Housing and Urban Development, commented at NRMLA's Annual Meeting in September, that he anticipates reverse mortgages will one day be as commonplace as 401(k)s and other retirement planning tools.
"HUD has gone to great lengths to educate community leaders and senior advocates about the potential benefits of reverse mortgages, which has helped make more people comfortable with recommending the product to their elderly clients," added Mr. Bell. "I think Commissioner Montgomery deserves as much credit as anyone for helping to make reverse mortgages a more mainstream financial planning tool."
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