More Washington-area residents are turning to reverse mortgages for retirement income as traditional sources of credit grow scarce.
In the D.C. area alone, the number of home-equity conversion mortgages (HECMs), by far the most popular type of reverse mortgage loan, has risen 289 percent since 2005, according to the National Reverse Mortgage Lenders Association.
Diana and Peter Nicholson, a couple in their 60s who live in a condominium in the Van Ness area, took out a reverse mortgage about a year ago at the urging of their friends.
“We took it out as a security blanket,” said Mrs. Nicholson, a retired paralegal. “So far we have used it for some basic household expenses.”
Nationwide, reverse mortgage lending has seen similar growth, with 107,558 loans originated in fiscal 2007, up 249 percent since 2005, according to the Federal Housing Administration. HECMs make up most of the reverse mortgage market - about 90 percent - because the loans are insured by the FHA, making them a much safer investment for lenders.
With more than 34 million Americans over the age of 65 and millions more baby boomers reaching retirement age, lenders are quickly becoming aware of the lucrative potential of the reverse mortgage market. Recent entrants include major lenders such as Bank of America and Quicken.
“I think everybody sees the silver tsunami on its way in baby boomers,” said Shelley Giordano, a reverse-mortgage broker for Wells Fargo, one of the largest HECM lenders in the D.C. area. “They are not as averse to borrowing as other generations have been. Lenders know that is the place to be.”
The mortgage industry regarded reverse mortgages as a niche product for many years, but they are becoming more popular as lenders look for new ways to replace the void created by the sudden demise of subprime lending.
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