WASHINGTON —Advertised as a path to an affordable retirement, federally insured reverse mortgages are showing signs of a rebound, drawing the scrutiny of regulators seeking to reduce historically high default rates that have cost the government billions.
Industry analysts expect strong growth as the housing market improves, particularly in once hard-hit Sun Belt areas including Phoenix, Miami and San Diego, and aging Americans find value in growing old in their homes.
They are also being boosted by high-appreciation, gentrifying neighborhoods in older cities such as New York’s Brooklyn borough.
Analysts say they expect continued interest as the leading edge of 78 million baby boomers approach 70, the age when a person typically begins to consider a reverse mortgage. A poll by Gallup in April found that 68 percent of Americans ages 50 to 64 said they were “very” or “moderately” worried about having enough money in retirement.
A reverse mortgage allows borrowers 62 or older to receive a line of credit or lump-sum or monthly cash payments off the accumulated equity in their homes. The loan comes due when the borrower dies, moves or sells the house. The borrower’s heirs are not liable if the loan balance exceeds the value of the home; FHA covers the risk.
Reverse mortgages have been pitched in slick TV ads featuring actor Henry Winkler and former U.S. Sen. Fred Thompson.
Philadelphia, where many families have lived in the same close-knit neighborhoods for generations, has ranked at the top for reverse mortgages awarded since 2011, according to an analysis of Federal Housing Administration data for The Associated Press by Reverse Market Insight, a California-based company. This year, it was followed by Los Angeles, Washington and Chicago.
