Makeover for reverse mortgages
Wall Street Journal, December 27th, 2006
A reverse mortgage could help you pay for retirement - or it could cost you and
your heirs a lot of money.
The housing boom of recent years has fueled
record growth in these products, which give homeowners an income stream they
don't have to repay until they sell their home or die. But reverse mortgages
have long been weighed down by high costs and complexities. Now, they're coming
in for a makeover that may save consumers thousands of dollars.
Sensing
growth opportunities as baby boomers retire, financial-services firms such as
IndyMac Bancorp Inc. and the privately held Seattle Mortgage Co. have been
cutting the costs of reverse mortgages and offering special deals. Now, big
national lenders are eyeing the market: Bank of America Corp. recently waded
into reverse mortgages with a pilot project in Phoenix, though it won't say when
it plans to roll out the program nationally. Countrywide Financial Corp. says it
expects to launch a new reverse mortgage in 2007. The competition from both is
expected to put further downward pressure on costs.
The federal government, meanwhile, is trying to push down costs as well. The
Department of Housing and Urban Development, which insures most reverse
mortgages, is looking into lowering the origination costs and mortgage-insurance
premiums that homeowners pay, according to HUD officials. At the same time,
Ginnie Mae, a federal housing-finance agency, announced in October that, for the
first time, it will begin packaging reverse mortgages for sale on Wall Street.
Ginnie Mae's move is widely expected to lower interest rates that consumers pay,
since studies have shown that the agency's guarantees in the traditional
mortgage market lower rates by between 0.5 percent and 0.8 percent.
Read more of this article. Learn more about Reverse Mortgages.