For example, if a home in Miami Florida was purchased for $300,000 in January 2019, the price would be $412,000 today. That’s a 37% percent increase from pre-pandemic prices. However, when adjusted for inflation the homes cost would have been $376,000 in 2019 dollars. This underscores the disconnect between present home prices and economic fundamentals. Consequently, these real estate markets are the most vulnerable to a pricing correction. When? Who knows? But the math can be summed up in one word- unsustainable.

Seizing Opportunities for Reverse Mortgage Originations:

Given this scenario, reverse mortgage originators should scrutinize the housing markets in which they originate to identify those more likely to experience a substantial drop in home values and are not exhibiting bubble behavior. This will inform you where you’re less likely to encounter valuation issues with lower comps values. This insight will guide you in areas where you’re less likely to encounter valuation issues stemming from lower comparable values. One tool we recommend for tracking real estate markets nationwide is SnapForce CRM, and you’ll find a link to our overview in the description.

So is there a silver lining for reverse mortgage lenders and originators? Yes, in fact, there is.

First, older homeowners are sitting on a mountain of home equity. The challenge is to wade through those prospects with not enough equity to qualify for a reverse mortgage. However, there are qualified homeowners in your city, county, and state.

Second, older homeowners seeking to qualify for a HELOC may have second thoughts when comparing the equity line’s interest rate to their existing mortgage. This is an opportunity to compare a home equity line of credit to the adjustable rate HECM’s (Home Equity Conversion Mortgage) credit line. In fact, several savvy originators are forming partnerships with local banks and credit unions to assist their older clientele who may not qualify for a HELOC or may find the terms unacceptable. Rather than having a dissatisfied depositor the lending institution can provide a bona fide alternative that encourages them to stay with the bank.

Third, those who recently refinanced their mortgage are not interested in pulling out some equity with a cash-out refinance at an interest rate and payment nearly twice what they’re paying today. This is where a HECM could not only eliminate required payments rather than doubling them but in some instances also provide a line of credit that cannot be frozen or reduced if their home value falls. For those not wanting to roll their existing mortgage balance into a reverse a proprietary loan like the HomeSafe Second could provide the funds needed for qualified borrowers 55 and older.

While the housing market is in a precarious position significant opportunities remain. How can reverse mortgage professionals best position even in a challenging market? Who will you partner with to have more conversations with potential borrowers? Please share your inputs in the comments below.