Reverse Mortgage As a Business Opportunity

Interest in the reverse mortgage program has grown dramatically with lenders and brokers as rising interest rates have dampened conventional home loan originations and refinance activity.

Reverse mortgages not only provide additional fee income, they also offer lenders a way to promote community stability, receive favorable publicity and credit under the Community Reinvestment Act (CRA).

Reverse mortgages have been around in one form or another since the early 1960s. The product remained in relative obscurity until 1990 when the U.S. Department of Housing and Urban Development unveiled the federally-insured Home Equity Conversion Mortgage (HECM). The sector got another boost six years later when Fannie Mae launched its own reverse mortgage product, the Home Keeper.

HECM production accounts for 90-plus percent of the total market. To date, more than 200,000 HECMs have been originated in the U.S., including more than 43,000 in fiscal year 2005 and 38,000 in FY 2004.

The surging popularity of reverse mortgages can be attributed to several factors, including 1) greater consumer awareness of, and comfort with, the product, 2) increasingly tighter budgets caused by rising healthcare costs and lower returns on investments; 3) strength of the housing market with steady increases in property values and 4) more lenders offering the product.

As the national voice for the reverse mortgage industry in Washington, D.C., National Reverse Mortgage Lenders Association, or NRMLA, serves as an educational resource, policy advocate and public affairs center for reverse mortgage lenders and related professionals. NRMLA was established in 1997 to enhance the professionalism of the reverse mortgage business. In that capacity, NRMLA educates consumers, trains lenders to be sensitive to the needs of older Americans, enforces our Best Practices and Code of Conduct, and promotes reverse mortgages in the news media.