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Reverse Mortgages: Still Moving Forward

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26 January 2010

Abstract

REPORT PREVIOUSLY PUBLISHED BY OLIVER WYMAN

The reverse mortgage industry has continued to grow despite broader turmoil. Although still a small portion of the broader mortgage market, reverse mortgage products now generate over $1 billion in revenue for the industry on an annual basis.

In Reverse Mortgages: Still Moving Forward, Oliver Wyman discusses the reverse mortgage market in the United States and looks at opportunities for market participants. In 2008, originations of reverse mortgages insured by the Federal Housing Administration (FHA) grew by 6.4% to 115,176 units, setting an annual record. The market for reverse mortgages has held up well, despite the unfavorable demand and supply trends. This is due to:

  1. Declining interest rates have mitigated the impact of falling house prices.
  2. Reverse mortgages satisfy a key customer need (senior citizens)
  3. Proprietary products have never been a significant factor in the industry

The market is being supported by the government with guaranteed pricing and liquid secondary markets. The question for potential providers should not be whether to compete, but how. While there are significant opportunities for specialist manufacturers and investors, the largest untapped opportunity remains in distribution.

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