This shift has been seen in both traditional and reverse mortgages, as private lenders have been able to provide more competitive products and expanded access to potential borrowers.
One of the main drivers behind this decline is the increasing availability of private reverse mortgages, such as the Home Equity Conversion Mortgage (HECM). HECMs have grown in popularity in recent years, offering seniors greater flexibility with regards to loan terms, as well as more options when it comes to accessing their home equity. The HECM program also provides various protections that are not available through securitized FHA loans, such as a non-recourse loan feature and other protections that can protect seniors in case of default.
The traditional FHA loan has also seen a decrease in usage among seniors, with private products now dominating the market. Private FHA loans offer more competitive terms than their FHA counterparts, and many lenders have started to offer specialized products tailored towards seniors. These loans often come with much lower interest rates and flexible repayment structures that make them more attractive to potential borrowers.
The final factor that has led to the declining use of securitized FHA loans among seniors is the rise of non-FHA products. Private lenders now offer products that do not require FHA insurance, making them an attractive option for older homeowners who may not qualify for a traditional FHA loan. In addition, these products often come with more flexible terms, including the ability to take out larger lump sums of cash than are typically available through an FHA loan.
In summary, the use of securitized FHA loans for seniors has declined in recent years due to the increased availability of private products. Reverse mortgages such as the HECM have allowed seniors greater access to their home equity, while private FHA and non-FHA loans offer more competitive terms and flexibility. As a result, private products have become the go-to option for many senior borrowers. While it is still possible to obtain a securitized FHA loan, it is no longer the predominant option for those looking to access their home equity.
This article was contributed on Oct 20, 2023
