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WASHINGTON – The U.S. population is aging, and so is credit unions’ membership. With data showing mid-life consumers and seniors having the highest rate of homeownership and sitting on a large chunk of home equity, credit unions need to look into adding reverse mortgages to help these members tap into that unused equity to pay for other necessities.

Of the two types of reverse mortgage business models-the Home Equity Conversion Mortgage (HECM) and proprietary models-the former is the most popular accounting for about 98% of the market. But while HUD has been offering HECM since 1989 and the agency’s statistics show the number of FHA endorsed reverse mortgages is expected to increase dramatically, only a handful of credit unions currently offer the product, said Callahan & Associates Senior Industry Analyst Tom Geggel in a July 13th Webinar he hosted on “Addressing the Feasibility of Reverse Mortgages.” Joining Geggel in the Webinar was a panel of three including Katrina Jones, director of lender strategies, Fannie Mae; Tom Walker, president, MEMBERS Trust Co., and Jeanie Olsen, vice president mortgage services, Mountain America FCU. Many credit unions have been deterred from offering the HECM reverse mortgages for various reasons-high borrower fees, associated product costs, and the complexity of the loan. In addition, the lender has to qualify with HUD for servicing. Some panelists noted that member demand hasn’t been strong enough to justify the costs, but that’s changing. HECM correspondent lenders also have to receive FHA approval to originate the loans and have a net worth of $63,000, plus $25,000 for each branch office up to a maximum required net worth of $250,000. Legislation that would either increase or remove altogether the $250,000 limit is currently being considered by Congress, and the panelists concurred the limit is on the docket to be reviewed to be increased or totally removed.

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