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U.S. retirees return to reverse mortgages, big banks stay away

A retired couple take in the ocean during a visit to the beach in La Jolla, CaliforniaU.S. baby boomers desperate for retirement income are increasingly turning back to a financial product that, after the housing bust, had been left for dead: the reverse mortgage, Reuters reported yesterday. Borrowers took out $15.3 billion of the loans in 2013, an increase of 20 percent from the year before, according to industry publication Inside Mortgage Finance. The record year was 2009, when there were $30.21 billion of reverse mortgage loans made. Brokers and bankers say that the 77 million retiring baby boomers will likely help fuel further growth in the loans in the coming years, making the business a growth spot in a home loan market where volumes have recently been declining. But at this stage, most bigger lenders are uncomfortable with the loans; for example, in 2011, Wells Fargo and Bank of America backed out of the business. Wells Fargo cites factors including unpredictable home values and the level of delinquencies as reasons for it to stay away from reverse mortgages. The government agency that guarantees these loans, the U.S. Federal Housing Administration, found them to be risky, too. Losses on reverse mortgages were a big reason for the agency’s $1.7 billion taxpayer bailout last year — and some experts worry they could lead to similar trouble again.  Full story here.