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Why the Fed is killing borrowing power

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Why the Fed must weaken consumer borrowing & credit

Spending, housing affordability, and overall consumer demand are in the crosshairs of the Federal Reserve’s goal to reduce inflation. Borrowing and spending fuel the U.S. economic engine. As a result, critics argue that the actions of the Federal Reserve are having significant adverse effects on the average citizen’s access to credit and loans, thus stifling economic growth and opportunity. This hits particularly close to home for potential reverse mortgage borrowers.

In response to last week’s show on the Fed’s pause on rate hikes one of our viewers commented,

“The issue will be how much buying power does the senior have when utilizing the HECM in a volatile market as this. Regardless of the “pause” in interest rates we have already seen the impacts with lower than normal LTV tables. It use to be age minus 10 would give you the LTV percentage but today it’s more like age minus 30.”

While the Federal Reserve’s actions are aimed at maintaining price stability and preventing excessive inflation, the consequences are detrimental to the average American. Today

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Editor in Chief: HECMWorld.com
 
As a prominent commentator and Editor in Chief at HECMWorld.com, Shannon Hicks has played a pivotal role in reshaping the conversation around reverse mortgages. His unique perspectives and deep understanding of the industry have not only educated countless readers but has also contributed to introducing practical strategies utilizing housing wealth with a reverse mortgage.
 
Shannon’s journey into the world of reverse mortgages began in 2002 as an originator and his prior work in the financial services industry. Shannon has been covering reverse mortgage news stories since 2008 when he launched the podcast HECMWorld Weekly. Later, in 2010 he began producing the weekly video series The Industry Leader Update and Friday’s Food for Thought.
 
Readers wishing to submit stories or interview requests can reach our team at: info@hecmworld.com.

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2 Comments

  1. As usual the industry uses terms it does not understand. Buying power has to do with the amount of goods and services one can buy in one time period ersus another. In the case of the video, the issue is borrowing power.

    Borrowing power is the net proceeds one can obtain in one time period compared to another when the only variables that do not change are age and the value of the home. However borrowing power and Principal Limit power are not the same. Note that changes in upfront costs can impact borrowing power.

    Before telling the world what is what, let us first master the subject matter we are trying to present or be prepared to look like the undereducated salespeople we are. For an industry that stresses education…

  2. In the bygone era of 2009 and before the approximate PLF for ages 62 through 70 was the age of the YOUNGEST borrower. Evidently the person being quoted is a more recent arriver into the industry.


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