Reverse Mortgage Guide

Any one see a reverse mortgage worry here?

The National Association of Realtors reports that in the second quarter of 2007 home prices fell in 41 states, rose in six and were unchanged in one. Two states did not have sufficient data to report.

“Total state existing-home sales, including single-family and condo, were at a seasonally adjusted annual rate of 5.91 million units in the second quarter, down 10.8 percent from a 6.63 million-unit pace in the second quarter of 2006,” says NAR.

As to prices, NAR figures show that the national median existing single-family home price was $223,800 in the second quarter, down 1.5 percent from the second quarter of 2006 when the median price was $227,100.

So, why is this a reverse mortgage issue?

Reverse mortgages are structured so that they are non-recourse loans — the debt can never exceed the sale price of the property. If the value of the house is insufficient to cover the debt the lender cannot sue the owner or the owner’s estate for any unpaid balance.

In other words, projections which seem to always show rising home values may be more iffy than financial models predict — with appropriate consequences for lender bottom lines.

This entry was posted on Friday, August 17th, 2007 at 5:55 am and is filed under Reverse Mortgage . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.