The Future of Reverse Mortgages

by Joe Sesso on July 4, 2011

With the announcement last week by Bank of America that it will no longer offer reverse mortgages, this federally sponsored program could be on the way out. Earlier this year Wells Fargo, the largest provider of reverse mortgages, announced that it was discontinuing it’s program by mid 2011. That announcement made Bank of America, previously the second largest provider of reverse mortgages, the new leader. With the exit of the two largest providers of this program, does this signal the end to reverse mortgages?

Reverse mortgages are loans that can be taken by seniors 62 and over on their homes. Instead of paying a monthly mortgage to the bank every month, the bank pays the individual a check every month. The monthly payments are then deducted from the equity in the property. The individual pays the bank bank when they sell the home or when the home is sold by their estate after they die. It’s been a great form of retirement income for seniors for more than 20 years.

Both Wells Fargo and Bank of America stated the volatile real estate market and depreciating home values as the reason why they have decided to discontinue this program. So does this mean the doom of reverse mortgages? Not necessarily. The program is a federally insured program, which means limited risk to lenders. Many smaller banks are still offering these loans and have stated that they will continue to do so. Stay tuned…

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