The economic meltdown took its toll on just about every segment of the American population, and like most others, senior citizens have seen their retirement savings devastated. Even before the worst of the financial crisis, things were tough for older Americans, reports Eric Bachman, founder and CEO of Oakland, California-based Golden Gate Financial, who says that since the market downturn, the bankruptcy rate for people over the age of 75 has climbed more than 400%. So it comes as no surprise to Bachman that the number of seniors researching reverse mortgages has increased dramatically over the course of this year.
Reverse mortgages are one of the few options that house-rich but liquid asset-poor seniors have to regain some kind of financial balance, and while they have been available exclusively to senior citizens since the late 1980s, Bachman says it is only in the wake of the markets and economic crisis that there has been a sharp rise in the number of reverse mortgages. Well over 100,000 such loans were granted in 2008, he says, and an increasing number of seniors are exploring the option.
Indeed, Bachman says the number of seniors using Golden Gate Financial’s online reverse mortgage calculator rose by 90% from the second quarter of this year to the third.
Bachman, notes there are 37 million Americans over age 65, and he argues that the reverse mortgage is an appropriate vehicle that “tides senior citizens over as their other financial assets regain value,”
But even as the numbers show more seniors looking to avail themselves of reverse mortgages, federal legislation that expires at the end of this year is set to reduce the amount of money a reverse mortgage can yield from $625,500 back to $417,000.