Even though the subprime lending market is struggling, and even traditional mortgage lending is down, there is one mortgage lender sector that is doing well: reverse mortgage lending.
A reverse mortgage is a home equity loan in which the bank pays you. It’s like a mortgage payment to you. The home loan is paid off when the house is sold, so many retirees taking advantage of the reverse mortgage do not every actually have to worry about paying back the home loan. Upon death, the home is sold and the loan repaid.
Bank of America has started getting into the reverse mortgage lending business, and other financial institutions are looking into it as well. Realty Times reports:
According to trade news reports, Wall Street giants Goldman Sachs,
Credit Suisse, Bear Stearns and UBS are all exploring possible forays
into the reverse mortgage field. Unlike Bank of America, which plans to
retain all or most of its production in portfolio, the Wall Street
investment bankers would likely securitize their reverse mortgages-pool
them and sell them as bonds around the world.
This means that even if you are not quite ready to take out a reverse mortgage yourself (although you can consider it in your retirement planning), you can still do a little real estate investing in companies offering reverse home mortgage lending. Some of the expected investors in reverse home mortgage lending are likely to include pension funds as well.