Baby Boomers Adopt Technolgy At Faster Rate Than Gen Y

More baby boomers are logging on to social networking sites like myspace.

Accenture released a report last week that highlighted how Baby Boomers (45+) are adopting technology at a rate faster than the members of Generation Y (18-24). This does not mean that more baby boomers are using technology than young adults. However, it highlights two important trends– while baby boomers are consuming technology at a more rapid rate, the rate of use of consumer technology by young adults is leveling off. One can argue that the consumption of technology by Generation Y was so high to begin with, it is hard to imagine it continuing to accelerate, whereas the rates of technology consumption by Baby Boomers were low and have few places to go but up. The introduction of new more expensive products, such as smart phones, kindles, and netbooks, have been geared more to an older audience than to generally tight-budgeted college students and recent grads.

The data indicates that baby boomers are also buying and participating in this technology, more receptive to it than they were earlier. From a reverse mortgage standpoint, this means that the web will become an increasingly important marketing tool. Reaching seniors will no longer need to be confined to what is now traditional old-fashioned media. Baby boomers are joining facebook and myspace and tweeting on twitter.

And for those who do not seek to reach the old, but rather, the young, the shift in technological consumption is affecting the way they use technology too. As parents and (gasp) grandparents join facebook, younger users are changing their usage. The same is true on other social networking sites. Marketers of all products aiming to both sides of the age spectrum will need to rethink how to best reach their intended audience. And in the case of real estate and reverse mortgage sites geared towards seniors, this means increasingly exploring the internet.

The Great Housing Market Hope

Welcome good news: A BusinessWeek article last week announced that housing sales in some of the markets hardest hit by the financial crisis have rebounded to levels that have surpassed those reached during the housing boom. Cape Coral, FL, Las Vegas, NV and California’s Inland Empire all saw home sales in February reach rates that were 80% higher than those of a year earlier.

As mentioned yesterday, the vast majority of these sales are of foreclosed homes. The ability of first-time buyers to earn up to $8,000 in tax credits coupled with low mortgage rates and bargain prices have lured many into the market.

It’s great to see home sales increase and the number of vacant properties diminish. However, it is even greater to think of all the people who can finally own their home for the first time.

Housing Market Continues Decline in March

The US Census Bureau and HUD jointly released a report today which noted that the housing market continued to decline in March.

Building permits for privately-owned housing units dropped 9% below the Feburary rate and 45% compared to March of last year. For single family homes, the rate dropped 7.4% compared to February.

Housing starts declined 10.8% from February and 48.4% compared to March of last year. However, for single-family homes, the rate was unchanged from February.

But there is a silver lining– more houses were completed in March than in February. Privately owned homes were completed at a rate that is 3.5% higher than the month before, while single family homes were completed at a rate that is 5.0% higher than in February. The completion of homes is a good sign. It indicates that projects are still being completed and the growth of new homes.

The foreclosure market nonetheless surged during the first quarter. Foreclosures increased 9% over the previous quarter and 17% in March compared to February. Many of the new home sales are of foreclosed properties, especially in weakened markets, up to 70 or 80%.

Continued home sales, even if they are of foreclosures, mean the market has not stalled. Yet, increased foreclosure rates are not a good sign–hopefully the housing market will rebound soon.

Tax Day: Reverse Mortgages and Taxes

Happy Tax Day!

In honor of April 15, I’d like to bring up how taxes effect reverse mortgages. Reverse Mortgages are not considered taxable income. As a result, reverse mortgage borrowers do not pay an income tax on the proceeds of their mortgage.

However, even reverse mortgage holders are still responsible for paying the property taxes and insurance on their home. Seems they still have something to worry about on tax day after all.

NRMLA Proposes Counseling Test for Seniors

NRMLA (National Reverse Mortgage Lenders Association) is expected to announce that in order to receive their HECM counseling certificate, seniors must pass a test given by the HECM counselor. The counselor will have a list of 20 questions to choose from and must ask 10. The borrower must not get more than 5 wrong in order to get the certificate.

Requiring borrowers to pass a test is not a good way to assess their understanding of reverse mortgages. Many seniors have not taken tests in years. Taking a test, especially if the test is given orally, requires a level of concentration that is difficult for most individuals and is a stressful experience.

While mandating counseling for borrowers has more upsides than downsides, requiring those borrowers to then pass a test is an undue burden on borrowers. Although counseling can be a helpful safeguard to ensure that the borrower understands what a reverse mortgage is, some elderly borrowers, such as those with Alzheimers or dementia, likely do not have the ability to pass a test, regardless of whether they have an understanding of the situation. Even those who do fully comprehend the situation may get flustered and fail. Often, understanding of a topic is not well summed up on paper or in an oral question and response. The better gauge of understanding should be the counselor’s conversation with the borrower. As long as the borrower undergoes counseling, a test is not needed.

Reverse mortgages are often applied for in times of hardship. Requiring a borrower to pass a test, especially an oral one, is an unnecessary requirement that will cause more harm than good within the reverse mortgage process.

This Week’s Reverse Mortgage Rates: April 14, 2009

The weekly HECM rates for reverse mortgages are below. These rates are for April 14, 2009.

HECM 300: 3.60

HECM 325: 3.85

HECM 350: 4.10

HECM Libor 225: 2.701

HECM Libor 250: 2.951

HECM Libor 275: 3.201

HECM Libor 300: 3.451

NRMLA To Offer New Reverse Mortgage Credential

Last week, NRMLA (National Reverse Mortgage Lenders Association) announced that it is planning on offering a new designation for Certified Reverse Mortgage Professional/Loan Originators. To receive the credential, candidates will need to have at least 2 years of experience, closed over 50 loans, take 12 hours of classes, and pass a background check before they can even take the exam.

NRMLA cites the certification as an important step towards protecting consumers in reverse mortgage transactions. However given the size of the reverse mortgage market, it seems likely that the designation will be more easily available to those from larger firms and to those who specialize in reverse mortgages.

While there is clearly an advantage to specializing in reverse mortgages, there are many small lenders and independent loan officers. Although the designation is a useful step to help enfranchise consumers and ensure quality, the certificate should be available to dilligent and experienced officers at all firms– not just those that conduct the largest volume of reverse mortgages and have the largest amount of resources.

Reverse Mortgages and the Credit Crunch on Small Businesses

Reverse Mortgage lenders come in all sizes, big and small. Therefore what is happening to small businesses given the recession concerns the industry at large. The Wall Street Journal published an article on the effects of the credit crunch on small businesses. Needless to say, the picture wasn’t pretty. Since the recession began, credit card companies have been cutting credit lines and raising APRs and minimum payment fees. Credit cards are the most common form of small business loan, and these cut backs have had an effect. The number of businesses filing for business bankruptcy is higher than the number of individuals filing.

This does not mean that small businesses cannot flourish during the recession; many are doing quite well. However it does mean that expenses may be tighter for some of the smaller reverse mortgage companies this year. From an industry perspective, continuing to have small lenders is a positive thing. The increase in competition is healthy for any business, as is the prevalence of loan officers scattered throughout the country, convenient for seniors everywhere. Reverse mortgages have been flourishing, and hopefully this diversity does not fade.

From a consumer point of view, the increase in financial trouble for small businesses has led many individuals to look into reverse mortgages. In some cases, it can help seniors raise the funds they need to keep their business.

This Week’s HECM Rates: April 7, 2009

The weekly HECM rates for reverse mortgages are below. These rates are for April 7, 2009.

HECM 300: 3.58

HECM 325: 3.83

HECM 350: 4.08

HECM Libor 225: 2.73

HECM Libor 250: 2.98

HECM Libor 275: 3.23

HECM Libor 300: 3.48

Reverse Mortgages Abroad: Changes to the South Korean Reverse Mortgage Program

South Korea’s fledgling reverse mortgage program underwent a revision today when it was declared that, starting next week, seniors 60 and over will be eligible for the program

. Previously, the program was only available to those over 65.

South Korea’s Reverse Mortgage program was modeled on the US HECM program. Only 695 Koreans appear to have participated in the program in 2008, leading the Korean govt. to try to figure out how to increase the program’s popularity.

The government had been considering lowering the minimum age to qualify for a reverse mortgage to 55. This would have been especially shocking because South Korea is ranked 29th in the world in lifespan, averaging 79 years at birth. The United States, in contrast, is ranked 45th, averaging 78 years, making one wonder how economically sustainable a program that reaches to a larger age group is.