FHA Reverse Mortgages will Make Way for more private?

Taking the stress out of FHA reverse mortgage products and for personal, was the message presented by housing two academics in testimony presented for a Congress panel earlier this month. The progression may not be so far away, she said.

"The question remains why the Federal Government is subsidising of reverse mortgages for seniors and guarantee," said Anthony Sanders, Professor of Real Estate Finance and Senior Scholar, Mercatus Center at George Mason University.

With approximately 95% of the reverse mortgage market today consisting of conventional loans, say the representatives that they are not against the use of home equity to pay back pensions, but that the Government should have a lesser role in the light of the financial situation of the FHA.

"I am not against reverse mortgages as an equity extraction tool," said Sanders. "But I don't see any reason for the Federal Government to subsidize and guarantee."

Private products have a hard time competing in the light of the recent market shifts, but the difference is not because of the risk of the Government, said Jeff Lewis, generation mortgage President.

"In the traditional mortgage space the economic difference between a Government and a jumbo loan is marginal," said Lewis. "In the reverse mortgage space, the difference between a loan from the Government and a private loan is immense. This difference is not a reflection of increased risk of the Government. On the contrary, it is a function of the fact that the Government is drastically less than the cost of capital from the private sector. "

When the market comes back, so will private reverse mortgages, said another professor.

Houman Shadab, Associate Professor of law at New York Law School told "conventional reverse mortgages will likely increase in market share as the economy recovers, stabilize House prices and credit conditions improve," the Panel.

"At this moment the main obstacles for the development of private reverse mortgages seem to be continuing uncertainty about House prices and the willingness of lenders, insurers and investors to take housing price risk."

The Outlook is strong, he said. And insurers larger players as they already can be in actuarial-based products are equipped. It was rumored that this year, for example, New York life was looking for entry into force, in addition to the reverse mortgage company active in the space, such as insurers and Genworth Financial, previously, MetLife.

"There now appears to be a developing consensus around how to better adhere to market and produce what could be a standardized private insured reverse mortgage. For example, has an underwriter of life insurance and similar products recently argued that the reverse mortgage market could expand if actuarial methods used in other industries were applied on reverse mortgages. "

Written by Elizabeth Ecker

Labels: Mortgages, private?, Reverse