FAR’s Support Advances Valuable Research About the Household Finances of Older Americans and the Potential Benefits of Leveraging Home Equity
Publishes Supplemental Whitepaper to Expand on the Research Findings and Implications for Older Americans Nearing Retirement
San Diego, CA – October 27, 2021 – As part of its ongoing commitment to support retirement research and education, Finance of America Reverse LLC (FAR) announced today the funding of a newly-released research report from the Urban Institute, one of the nation’s top economic and social policy research organizations.
Providing financial support for Urban Institute research builds on FAR’s existing research and educational initiatives focused on helping retirees and pre-retirees live their best lives in their golden years. Following the Urban Institute’s research, FAR experts analyzed the results and released a whitepaper outlining additional findings that support the strategic use of home equity to bridge retirement funding gaps.
Kristen Sieffert, president of FAR, said: “The Urban Institute’s findings underscore our fundamental mission at FAR – the urgent need to educate and empower customers to have better financial outcomes later in life by broadening the discussions around financing retirement and ensuring they fully understand the benefits that alternative products such as reverse mortgages and our revolutionary retirement mortgage, EquityAvail, have in meeting their varied financing needs. Moreover, with interest rates still at historical lows, adoption of these innovative solutions today at a lower cost can help ensure that they are better prepared to meet financial challenges tomorrow.”
Sieffert continued, “We’ve been living in an ultra-low interest rate environment for some time, which has largely masked some of the broader, more systemic underlying financial challenges facing many Americans, especially our seniors, in terms of saving for and funding retirement. As interest rates and debt burdens rise, access to traditional products that help finance retirement will become more difficult, more expensive and, for a growing percentage of the demographic, impossible to access. The Urban Institute’s research illustrates that more Americans could benefit from tapping into their home equity and exploring solutions that help them reduce their monthly expenses.”
The Urban Institute report reveals that older Americans are carrying more debt than in prior years, with the average household debt steadily rising over the past 20 years. It points out that as individuals enter their retirement years and become more reliant on their savings than a regular income, their ability to qualify for some mortgage products becomes more difficult. The research shows that one-third of senior applicants are denied a mortgage due to high debt-to-income (DTI) ratios and lower credit scores. Due to high DTI for individuals age 65 and older, they are being locked out of mortgages, refinances, credit lines, and at the same time taking on more debt and paying higher rates of interest.
Speaking to the skyrocketing denial rates across the debt-to-income spectrum for cash-out, non cash-out and HELOCs particularly among seniors as illustrated in the Urban Institute research, Bill Dallas, President of Finance of America Mortgage, said: “As home prices continue to rise there will be increased pressure for older Americans to qualify for standard 30-year home loans. A benefit that Finance of America brings to discussions with customers by virtue of our suite of traditional and non-traditional financing solutions is showing them that there are suitable alternatives available to them. Through FAR, we offer a complete suite of reverse mortgage products led by our jumbo HomeSafe loan. These products provide a safe, no payment option that can enable more homeowners to qualify. We are the nation’s leader in developing and delivering proprietary alternative financing products, so we encourage homeowners to explore all financing options available to them and be sure to give us a closer look.”
FAR Experts Share Research Analysis
In addition to providing financial support for the Urban Institute’s research report, FAR convened its home equity and retirement planning experts to analyze the results and understand the potential implications for older Americans in the years ahead. The whitepaper “Seniors and the Threat of Rising Interest Rates” builds upon the Urban Institute’s research and offers additional proof points that illustrate why today’s market conditions and low interest rates create a ripe opportunity for retirees and pre-retirees to tap into one of their largest nest eggs – their home equity.
America’s seniors own in excess of $9 trillion in home equity that can be accessed through various financial products, if they qualify. As the Urban Institute research notes, a large number of older Americans are denied cash-out refinance loans and other types of mortgages due to their DTI ratio. However, home equity conversion mortgages and other types of proprietary products are underutilized by many eligible individuals and may be the right choice for some depending on their situation.
“We undertook this research to better understand the current retirement landscape and how financially prepared older Americans are for retirement. The insights and data we’ve analyzed indicates the number of individuals who could benefit from home equity-focused solutions continues to grow rapidly,” said Scott Norman, VP of Field Retail and Director of Government Relations at FAR. “This research adds to the mountain of evidence that retirees and pre-retirees need more financial products that allow them to save for retirement and help reduce their expenses in their final working years.”
FAR’s mission is to help create flexible solutions that make retirement work. Depending on the situation, a HECM may be the right choice. For others, a better option might be a proprietary product like FAR’s EquityAvail, which reduces monthly mortgage payments for 10 years and then eliminates them all together as the loan transitions into a reverse mortgage. By supporting innovative research and education from the Urban Institute and other leading research organizations and academic organizations, FAR can continue to create tailored products designed to address the needs of today’s retirees.
Norman added, “As interest rates and inflation rise in the coming years, debt-laden seniors will find themselves in an even more precarious situation. Innovative proprietary products like FAR’s EquityAvail can be a key part of the solution moving forward and create even more opportunities to introduce more individuals to FAR’s proprietary suite of retirement solutions.”
As interest rates rise in the near term and debt-to-income ratio continue to increase, financial security for older Americans will continue to be less and less attainable. However, older Americans with a significant amount of home equity have opportunities to leverage their home equity and create additional retirement planning options. By using the value of their property and accessing the right mortgage product, more seniors can prepare to enjoy their retirement.
About Finance of America Reverse
As a retirement solutions company and part of the Finance of America Companies (NYSE: FOA) family of companies, Finance of America Reverse is committed to empowering people with the tools they need to achieve financial independence and get to work on retirement. Through its team of Licensed Loan Officers and network of professional and wholesale partners, Finance of America Reverse offers products and services designed to help older Americans include home equity in their retirement plans. The company is licensed nationally and is a proud member of the National Reverse Mortgage Lenders Association (NRMLA).
The HomeSafe® and EquityAvail® reverse mortgages are proprietary products of Finance of America Reverse LLC and are not affiliated with the Home Equity Conversion Mortgage (HECM) program. Not all products are available in every state. Please contact us for a complete list of availability.
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This article is intended for general informational and educational purposes only, and should not be construed as financial or tax advice. For more information about whether a reverse mortgage may be right for you, you should consult an independent financial advisor. For tax advice, please consult a tax professional.