Lenders Beware: Reverse Mortgages Can Bite You in Your Assets
Report Summary
Lenders Beware: Reverse Mortgages Can Bite You in Your Assets
Reverse mortgages possess processing requirements that differ from other consumer loan products and risks that parallel mortgage and home equity lending.
Boston, September 27, 2010 – A new report from Aite Group examines the growing lender appetite for reverse mortgages and expresses strong concern for an industry lacking the controls and processes necessary to manage this product. The report looks closely at the reverse mortgage product, assesses its target market, and explores opportunities and risks for lenders. It also examines and advises on deployed technologies positioned to alleviate risk and processing concerns with minimal modification to existing software and analytics applications.
Over the next five to 10 years an aging and ever-growing consumer population will consider taking out home equity conversion mortgages, commonly known as “reverse mortgages.” Unfortunately for lenders, traditional servicing automation has difficulty accommodating loan processing for this product because repayment transactions do not occur until the property is sold. Challenges for lenders include potential for fraud, declining real estate values, the inability of most lenders to profitably manage real estate assets, compliance with a multiplicity of new rules, and a lack of quality technologies necessary to mitigate risk and improve processes.
“Reverse mortgage lending is not for the faint of heart,” says Christine Pratt, senior analyst with Aite Group and author of this report. “This loan product, fundamentally unknown, possesses processing requirements that differ from all other consumer loan products and risks that parallel mortgage and home equity lending. Lenders seeking to succeed with this product must be able to attract significant volumes — with attendant fees and interest — and prevent mistakes and fraud from siphoning off the assets.”
This 24-page Impact Report contains three figures and one table. Clients of Aite Group's Retail Banking service can download the report.