Reverse Mortgage Specialist Sentinel launches in South Africa

Reverse mortgage (home equity release) specialist Sentinel has just launched in South Africa.

Its South African company is a joint venture to be known as "Senior's Finance", with financial services company the Alexander Forbes Group. The company is already well established in its home country New Zealand, Australia, and Ireland with its reverse mortgage model.

Sentinel sees South Africa as an ideal market for home equity release, as house prices have grown very strongly over recent years, but seniors have very little savings and pensions. Due to the low savings rate, the company estimates that 90% of retirees will not be able to maintain their pre-retirement lifestyles during retirement.

Sentinel is planning two further launches in the pipeline.

House Passes National Reverse-Mortgage Loan Limit

Last month, the U.S. House of Representatives passed the Expanding American Homeownership Act of 2006 (H.R. 5121). This new bill would create a single national limit for the HECM (Home Equity Conversion Mortgage) program equal to the conforming Freddie Mac loan limit, which is $417,000 for 2006.

Under the current law, the location of the home dictates the maximum loan amount, which varies by county. These amounts range from $200,160 to $335,800. The new bill would set one national rate that would allow seniors to take out much larger reverse mortgage loans.

The Expanding American Homeownership Act also would provide other improvements to the FHA HECM program. The new legislation calls for a "home purchase" option that would allow people to use a reverse mortgage to purchase newer housing that better suits their needs (currently only Fannie Mae offers a reverse mortgage home purchase program.) It would also remove the current volume cap on the number of HECM loans that FHA can insure (currently at 250,000 loans.)

Reverse mortgages have already exploded in popularity over the last couple of years, but with the passage of this act, we could see even larger increases in the number of seniors utilizing this powerful program.

Reverse Mortgages on the Rise

The popularity of reverse mortgages in the U.S. seems to be exploding as more and more people begin to use their home equity to help fund retirement. Just take a look at these reverse mortgage statistics from HUD.

The U.S. Department of Housing and Urban Development endorsed a total of 7,572 reverse mortgages in June. And it has endorsed 55,659 reverse mortgages thru the nine months of FY 2006 ending June 30.

To put that in prospective the FHA endorsed only 43,131 reverse mortgage loans for all of FY 2005. In fact year-to-date totals represent a 83 percent increase over the 30,404 loans endorsed during the same period last year. That is impressive growth for any industry.

Korean Goverment to Back Reverse Mortgages

The South Korean government has decided to provide loan guarantees next year to financial institutions that sell reverse mortgages as part of its efforts to promote the products, the Ministry of Finance and Economy said.

These reverse mortgage loans will allow people to receive a certain amount of money on a regular basis from financial institutions using their homes as collateral, and the ownership of the home is taken over by the lender after the term of this kind of mortgage ends.

According to the ministry, the scheme, introduced in May last year, will help resolve the problems faced by the elderly with low incomes and strengthen the countrys social safety net. Also, the government plans to provide a variety of tax incentives for the products.