Reverse Mortgages: Still Moving Forward

January 26, 2010
Industry Trends
North America

Abstract

REPORT PREVIOUSLY PUBLISHED BY OLIVER WYMAN

The reverse mortgage industry has continued to grow despite broader turmoil. Although still a small portion of the broader mortgage market, reverse mortgage products now generate over $1 billion in revenue for the industry on an annual basis.

In Reverse Mortgages: Still Moving Forward, Oliver Wyman discusses the reverse mortgage market in the United States and looks at opportunities for market participants. In 2008, originations of reverse mortgages insured by the Federal Housing Administration (FHA) grew by 6.4% to 115,176 units, setting an annual record. The market for reverse mortgages has held up well, despite the unfavorable demand and supply trends. This is due to:

  1. Declining interest rates have mitigated the impact of falling house prices.
  2. Reverse mortgages satisfy a key customer need (senior citizens)
  3. Proprietary products have never been a significant factor in the industry

The market is being supported by the government with guaranteed pricing and liquid secondary markets. The question for potential providers should not be whether to compete, but how. While there are significant opportunities for specialist manufacturers and investors, the largest untapped opportunity remains in distribution.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Introduction

3

Reverse mortgages and the credit crisis

5

Demand outlook

8

Economic outlook

10

Opportunities for market participants

11

Conclusion

13

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