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Tuesday, July 05, 2011

Two big American banks call it a day and stop issuing reverse mortgages

Reverse mortgages = Equity release in UK words.

This is a very interesting development when Wells Fargo, the US’s top lender, announcing that it will stop issuing these loans, citing inflexible government regulations and concerns that home prices could continue to sink. Wells Fargo's announcement comes on the heels of Bank of America's move to exit the market earlier this year. As of April, these two banks issued nearly 44% of reverse mortgages, according to research firm Reverse Market Insight.

This is serious stuff. The only way that a great tranche of older Americans and Brits have to live during retirement is to free up some of the cash in their homes. That avenue has just gone or at least become a lot harder

It will be interesting to see what repercussions this has on the UK. In many ways, the decision of these US banks is like making a future call on the value of US domestic property. Their assumption is that it is going to keep falling in price. Dick Stroud

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