A comprehensive new study from the MetLife Mature Market Institute shows the age of those seeking Home Equity Conversion Mortgages (HECM ) -- commonly known as reverse mortgages -- has plummeted in the four years since the collapse of the U.S. housing market.
The study's authors also say these mortgages (i.e., special types of home loans that allow people to draw on home equity without monthly mortgage repayments) have evolved into a way for many older Baby Boomers to deal with pressing, if not downright urgent, financial needs.
As things now stand, boomers age 62-64 represent about 20% of HECM borrowers. The federally-backed lending product was once associated with a much older age group.
A Cooperative Effort with NCOA
The study, titled Changing Attitudes, Changing Motives: The MetLife Study of How Aging Homeowners Use Reverse Mortgages, was produced in conjunction with the National Council on Aging (NCOA). It shows that the average age of those who have gone through reverse mortgage counseling has declined and is now 71.5 years of age.
The Department of Housing & Urban Development (HUD) reports a similar decline in the average age of borrowers to age 73.
Forty-six percent of homeowners considering a reverse mortgage are under age 70. The percentage of 62- to 64-year-olds who are prospective borrowers has increased 15 percentage points since 1999, even though younger applicants have had lower available loan limits.
More Consumer Education Needed
The study concludes that older homeowners will need assistance and consumer education to ensure they make wise decisions about the most appropriate use of their home equity "nest egg." To that end, a consumer guide, titled The Essentials: Reverse Mortgages, accompanies the study and is available free to the public. It is aimed at helping potential borrowers learn more about the product and its implications for their finances.
How They Found the Data -- What was Learned
Data for the study were collected by HUD-approved counselors as part of mandatory counseling for all reverse mortgage applicants. Between September and November 2010, counselors completed 21,240 of these counseling sessions.
About two-thirds (67%) of recent counseling clients also have a conventional mortgage that will need to be repaid if they decide to take out a reverse mortgage, the study found. About one in four (27%) reported having both housing and non-housing debt. Borrowers with sizable existing debt may rapidly deplete home equity.
The report provides the following information for consumers, financial advisors and others counseling older Americans.
Info: Changing Attitudes, Changing Motives: The MetLife Study of How Aging Homeowners Use Reverse Mortgages, and The Essentials: Reverse Mortgages can be downloaded from www.MatureMarketInstitute.com. They can also be ordered through the MetLife Mature Market Institute website, or by e-mailing: MatureMarketInstitute@MetLife.com or "snail mail" to MetLife Mature Market Institute, 57 Greens Farms Road, Westport, CT 06880.