Thursday, April 12, 2007

Reverse Mortgages / ECONOMIST

the full article from the economist focuses also on the programs for the wealthy. click on the headline to read this. i´m pretty sure that the reverse mortgages will become a booming business. i hope that the ethic in this part of the mortgage industry is at least in part existing........but i think this is wishful thinking.

der komplette artikel befasst sich auch mit den angeboten für die reichen älteren. dazu bitte auf die überschrift klicken. gehe jede wette ein das dieser bereich des hypothekenmarktes bommen wird. man kann nur hoffen das hier noch nicht aller anstand der hypothekenfinanzierer über bord gegangen ist.....das bleibt aber wohl ein frommer wunsch.

As the number of pensioners increases, banks are extending a helping hand—and, of course, a loan or two

...A bit incongruously, Mr Feikema's wrinkled visage is the face of the future. In January 2006 the first of America's 77m baby-boomers turned 60. Experts reckon one spouse in every 65-year-old couple will live to Mr Feikema's age. Such greying is evident across the rich world.
But with government treasuries under strain and companies increasingly abandoning “defined-benefit” pension plans, ageing boomers today are shouldering more of the risks of a long old age. “We call it the yo-yo environment,” says Robert Reid, who heads Wachovia's retirement group, “You're On Your Own”. In America, where savings are low and health-care costs anything but, the prospect of being old and sick looks complicated—and quite possibly bleak.

For banks, insecurity represents a huge opportunity. McKinsey, a consultancy, reckons that those five to ten years away from retirement hold almost a third of personal financial assets in America. HSBC, Europe's biggest bank, estimates that, worldwide, people over 55 years of age hold around $63 trillion, or about 70% of the planet's wealth.....

> jenny should broaden her offer .../ sie sollte demnächst ihr angebot erweitern...

The greatest potential, however, is tied up in the housing market. McKinsey estimates that more than 80% of Americans who are retired or near retirement are homeowners, sitting on over $3 trillion in untapped home equity. In America and elsewhere, banks are helping the elderly gain access to this through reverse mortgages, which let people borrow against the value of their homes—either in one big, upfront loan or through a line of credit. Retired people at first pay nothing; accumulated interest and all fees are paid off when the home is sold, with any excess equity going to the homeowner's heirs.

In America almost all reverse mortgages are guaranteed by the federal government, so that if a homeowner's debts are greater than the value of his home at the time of death, his estate will not have to make up the shortfall. Government-insured reverse mortgages soared to a record 76,000 last year, up 77% over 2005, though they are still a fraction of the overall mortgage market. Ginnie Mae, a federal housing-finance agency, announced in October that it would begin pooling reverse mortgages into securities for sale to investors. That should spur the market further.
this is from
Record Number of Reverse Mortgages Made in February - March 19, 2007
For the second straight month, the Federal Housing Administration (part of the U.S. Department of Housing and Urban Development) insured a record number of reverse mortgages. In February, FHA insured 9,349 reverse mortgages, compared to 8,824 in January and 5,841 loans in February 2006. So far, FHA has endorsed 42,191 loans during the current federal fiscal year (beginning Oct. 1), compared to 26,160 during the same period last year.

However, financial advisers often hesitate before recommending reverse mortgages. In Britain customers fell foul of mis-selling scandals in the 1990s. Fees can be astronomical—in America, they can top 10% of the loan amount—and the reputational costs from problems can be high. America's National Association of Securities Dealers has filed 358 enforcement actions over annuity sales in the past six years.
> whenever i see books like this....../ immer wenn ich solche bücher sehen......

That means banks entering this new market have to ensure that ageing clients understand the products they are buying, especially when the instruments are complicated, fee-laden and confusingly priced. The opportunities for catering to white-haired grandmothers are huge, but the damaging headlines can be large, too.



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