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The Big Squeeze

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Older homeowners are getting squeezed by loan rejections and skyrocketing homeowner’s insurance premiums

The Credit Crunch is Here

On this show, we’ve warned repeatedly of the coming credit crunch, and now consumers are beginning to feel its impact. Just as mariners would ‘batten down the hatches’ when the ship was about to enter rough seas, lending institutions are aggressively moving to reduce their risk exposure to bad loans amid concerns of a looming economic recession. In the wake of one of the Federal Reserve’s most aggressive rate hike cycles large banks such as JP Morgan Chase, Wells Fargo, and Citigroup are setting aside more money to absorb an expected influx of bad consumer debt. It then comes as no surprise that the Federal Reserve’s Survey of Consumer Expectations survey found the overall rejection rate for credit applications jumped to 21.8% in June, up substantially from 17.3% in February.

Considering these circumstances older homeowners seeking to refinance their existing mortgage or purchase a new home could find their loan application denied. In fact, the Fed’s survey found a 29.6% probability that home mortgage refinance applications would be rejected and a staggering 46.1% probability of traditional mortgage applications facing the same fate.

Do retirees need access to more cash than ever before? There’s a strong case to be made for answering yes for two reasons. First, while somewhat moderated, inflation remains a persistent burden for Americans living on a fixed income. Much of that pain can be found in the Core Consumer Price Index or CPI which measures the change in the price of goods and services while excluding more volatile prices for food and energy. The Core CPI has been especially sticky while general or headline inflation has dropped more significantly since last June.

The property insurance disaster

Another reason many retirees have an increased need for access to cash is the implosion of affordable and accessible

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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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6 Comments

  1. I bought a home in Fort Myers Florida one year ago and the insurance was $1500. One year later it is $3000 and my insurance broker said they’re sticking with Insurance Florida but this new year‘s renewal will be at $4500 so in two years it will have tripled, I own the home out right so I’m not required to carry insurance however the large number of hurricanes hitting Florida in recent years forces me to have insurance. HOA went up, so did taxes and utilities, and club membership for golf pool and all the other niceties and amenities my wife and I worked over 60 years to attain are hard to give up so we just continue working and pay whatever it costs. Add medication increases for copays ( one med med alone went from a qtrly copay of $575 to $1825 this Jan 1. I was forced to buy same in Canada for just $141 qtrly. America should be ashamed of where it’s at on these senior issues. Add gas prices food and more and something’s gotta give. 5 years ago my monthly cost of living was $2,000 a month less. Retirement- what’s that. Seniors are being forced to continue working. Reverse is becoming a necessity.

    • Mike- thank you for a real-life perspective. Those costs are atrocious and show the immense financial pressures older Americans face. Thanks again.

  2. Just another reason we need to continue to spread the word about the value, benefit and power of the reverse mortgage loan!
    Thanks Shannon.

  3. Shannon as usual you are on target, however, seniors are also seeing huge increases in their property taxes. due to higher valuations. Best. Ed

    • Edward- you are most correct. Property taxes are yet another financial burden that has grown thanks to abnormal home appreciation post-pandemic.


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