Meg Handley cited Dick Van Dyke in her June 29, 2011 article entitled Big Banks Bow Out of Reverse Mortgage Market.
The move comes as an increasing number of ill-prepared Americans are expected to head into retirement, which has some financial planners worried about how asset-poor seniors will make ends meet with one less option for retirement income.
“The government [has to] do something to shore up the program, to right the ship so that legitimate financial institutions will still participate,” says Dick Van Dyke, an author and retirement educator based in Springfield, Ill. “We’ve never seen anything like the amount of folks that are going to retire over the next 15 years that aren’t prepared for retirement.”
But Van Dyke doesn’t blame banks for exiting the market and says the government needs to revise the guidelines governing reverse mortgages to make the product more attractive to lenders again. Looking ahead, Van Dyke expects demand for reverse mortgages to pick up considerably, with many retirees relying on these products to be available to supplement their income stream after retirement.
Historically, the cost of reverse mortgages has been higher than conventional mortgages, but without enough lenders competing for borrowers, those costs could go even higher, Van Dyke says, further restricting the availability of the product for seniors.
“There’s nothing stopping banks from pulling out of this program,” Van Dyke says. “But as soon as the government realizes that this program has to be adjusted to work with the private sector, and the private sector really is the most efficient, they’re going to have to work hand in hand.”
“This doesn’t need to be a welfare program,” he adds. “For people who have legitimate equity in their properties, this can still be a win-win [program] if it’s designed properly.”
The full article is available online at US News & World Report.