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Survey: Reverse Mortgage Borrowers Skewing Younger

Reverse Mortgages, special types of home loans that allow people to draw on home equity without monthly mortgage repayments, has become an answer for many older Baby Boomers when dealing with urgent financial issues, according to a study from the ""MetLife Mature Market Institute"":http://www.metlife.com/mmi/research/changing-attitudes-changing-motives.html#key%20findings.

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Boomers aged between 62 and 64 currently represent one-in-five prospective borrowers of reverse mortgages, or Home Equity Conversion Mortgages, which was once associated with a much older age group.

The MetLife study, which was produced in conjunction with the National Council on Aging (NCOA), reports that the average age of those who have gone through reverse mortgage counseling declined to 71.5 years of age. HUD reported a similar decline in the average age of borrowers to age 73, according to a release.

Currently, 46 percent of homeowners considering a reverse mortgage are under age 70, and the percentage of prospective borrowers between the ages of 62 and 64 increased 15 percentage points since 1999, despite the fact that younger applicants have had lower available loan limits.

About two-thirds, 67 percent, of recently counseled clients through the study have a conventional mortgage that will still

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need to be repaid if they decide to take out a reverse mortgage. About one in four, 27 percent, reported having both housing and non-housing debt.

""Consumer attitudes about reverse mortgages are changing because the recession has eroded confidence about retirement security and Americans will rely more and more on these measures,"" said Sandra Timmermann, director of the MetLife Mature Market Institute.

Timmermann continued, ""As reverse mortgages do not have income requirements and since other forms of credit have become less accessible, these loans will become more attractive.""

Timmermann also added that HUD recently stated that lenders may conduct financial assessments of applicants to ensure they have the ability to meet their loan obligations.

Barbara Stucki, VP for home equity initiatives for NCOA, added that going forward there is a good chance home equity will evolve from being an emergency measure to one that is part of a retirement plan.

""While the economic downturn may be a major reason borrowers have begun to use this financial option for debt management, in the future it is likely that tapping home equity will be viewed as part of the entire retirement planning process,"" said Stucki. ""It is likely the reverse mortgage option will be considered alongside some of the more traditional methods of saving and investment.""

The study concluded that older homeowners will need assistance and education to ensure they make the right decisions regarding the use of their home equity. A free consumer guide, ""The Essentials: Reverse Mortgages"":http://www.metlife.com/assets/cao/mmi/publications/essentials/mmi-reverse-mortgages-essentials.pdf, accompanies the study and is available to the public.

Data for the study was collected by HUD-approved counselors. Between September and November 2010, counselors completed 21,240 of these reverse mortgage applicant counseling sessions.

About Author: Esther Cho

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