Orange County Reverse Mortgage
An Orange County reverse mortgage is becoming more and more of a popular loan. Why is this? For a reverse mortgage to be popular in a given region, at least two things are required. One is a sizable senior population and the other is healthy home values.
The most recent census showed an Orange County senior population of about 310,000, over 11% of the total population, and this segment is growing rapidly, expected to double in the next 20 years. This increase of those age 62 and over is happening across the nation and has been termed a demographic shift of historic proportions. The western portion of the United States, however, is leading this shift. California has the largest senior population of any state in the union, with about 4.2 million.
Orange County also has relatively high property values. Nationwide the median home value is about $125,000, but Orange County’s median home value, even after several years of downward trend, is still about $300,000. The higher the home value the more money the borrower may receive, and thus the more attractive the reverse mortgage becomes. But just as important as having a high value, the loan program’s loan limits need to be able to accommodate those values.
In 2006 the maximum loan limit for Orange County was 362,790, and the median home value at that time was $709,000. So let’s say in 2006 someone in Orange County had a home worth $500,000, far less than the median value, and a mortgage balance of $362,790, with about 27% equity. However, for purposes of a reverse mortgage they had zero equity, because HUD would not recognize a value higher than $362,790. This person would not qualify for a reverse mortgage. No wonder HECMs (Home Equity Conversion Mortgage, the technical name for reverse mortgages) were not very popular in Orange County or other high value areas at that time. It just did not meet the needs of a lot of people.
Then the financial crisis hit, not just in the United States, but internationally, and the government tried to figure out means to stabilize the housing market and improve the economic position of people. One strategy was to increase the loan limits for FHA programs. By February 2009 the HECM loan limit had increased to $625,500, which meant many more people could qualify. The results can be seen in the numbers. In 2006 the number of reverse mortgages done nationwide was 76,351. By 2009 this jumped to 114,692!
The combination of all these factors and more has created a surge in reverse mortgages in Orange County and in similar places, helping the financial situation of many thousands of senior citizens.