It may already be too late; but in America I am way before my time. For the last few years we have been warning people to take steps to guard their assets and equity from the impending downturn. Now in a major move that should be front page news Bank of America and Wells Fargo are exiting the reverse mortgage market.
Please read the article in the New York Times: http://www.nytimes.com/2011/06/18/your-money/mortgages/18reverse.html
This is bad news for American seniors because Bank of America and Wells Fargo are taking the position that they don’t want to be overly exposed to the huge downturn in home prices that is about to happen. Instead they are willing to leave 43.6% of the reverse mortgage market on the table and opt for safety. When the two biggest players in a market walk away you can bet they know something that the American public doesn’t know.
If seniors lose the ability to borrow with reverse mortgages they will affectively be cut off from their equity because most can not qualify for loans on their fixed incomes. Great news for banks and really bad news for seniors. This move would also cut seniors off from what could be 85% of their net worth; because 85% of American’s net worth is real estate equity.
Why should the rest of Americans who are not seniors care? Because statistically the baby boomers are holding this country together. 65% to 70% of the wealth belongs to the boomers and 85% of that wealth is the real estate. If the Boomers get hurt we all get hurt and by the way, the boomers are our parents, grand parents, aunts and uncles who will look to their broke children for help.
There is time but not much to get educated and make some much better decisions, Don’t be like the majority of people who simply let their equity evaporate in 2008 even though all the best financial people were warning of an impending crisis. In a high inflation period interest rates soar for lending but they also soar for savings. So you would rather have your equity in a safe place earning interest for the next decade(because it will take at least that long to recover) 0r losing 30% to 40% with the drop in home prices.
And please don’t forget that the government is proposing to raise home down payments to 20% which will further kill home prices and equity.
It is time to make a move.
Watching the whole place burn to the ground is not an option. When the informed money moves away from the table you better wake up and do the right thing before the options are taken away from you.
Manager of Wealth
New York Times Article : http://www.nytimes.com/2011/06/18/your-money/mortgages/18reverse.html