Golden Gateway Financial Links Depreciating Home Values to Limited Financing Options for Senior Citizens

Golden Gateway Financial, the Web's most comprehensive financial resource for seniors and retirees, today released details of an internal study that shows the window is closing for many seniors in need of additional funds. The findings reveal that one of the hidden repercussions of the current housing market is the inability of senior citizens to recapture equity from long-held properties.

"Our research shows that for the reverse mortgage industry, the adage 'time is on my side' does not necessarily hold true in a down market," said Eric Bachman, founder and CEO of Golden Gateway Financial. "Those eligible seniors who think they may need money in the next few years are actually losing ground, and they should consider locking in a higher home value now before values continue to erode."

According to Golden Gateway Financial, consumers eligible for a reverse mortgage, but who have not yet secured one, have forfeited a national average of nearly 14 percent of the cash available to them over the past year. The study found that there is nearly a one-to-one correlation between the percentage drop in a home's value and the percentage decrease in up-front cash available to its owner through a reverse mortgage.

Furthermore, despite the fact that many consumers in the past have been able to secure more money by waiting a year or two to obtain a reverse mortgage, findings demonstrate that declining home values around the country have effectively canceled out the age-related advantages that some consumers had hoped to gain by securing a reverse mortgage later in life.

For example, a 72-year old individual that owned a home valued at $200,000 in January of 2007, but that has lost 14 percent of its value in twelve months, has watched his or her available up-front cash through a reverse mortgage also dwindle by 14 percent from $125,969 to $108,804 in that same period. By waiting a year to conceivably secure more cash through a reverse mortgage, this individual actually lost more than $17,000 due to declining home value.

"Our first piece of advice to seniors and their advisors is always to responsibly evaluate the merits of a reverse mortgage," continued Bachman. "For those individuals for whom a reverse mortgage is a good fit, it just makes good financial sense to evaluate and make that decision now."

The Golden Gateway Financial study examined reverse mortgage lending criteria alongside the most recent S&P/Case-Shiller analysis of depreciating home values(1) over the last twelve months to highlight the dynamics of how eroding home values, reverse mortgage lending limits, and age intersect to impact equity available to senior citizens. The study applied reverse mortgage underwriting criteria in concert with the S&P/Case-Shiller home price index across a number of ages and geographies.

The example table below highlights Golden Gateway Financial findings in representative markets by both age and calendar year. The table assumes a home valued at $200,000 in January of 2007, and the cash available is computed using the most common type of reverse mortgage, the FHA insured Home Equity Conversion Mortgage (HECM). A more comprehensive table reflecting all of the markets referenced in the S&P/Case-Shiller Home Price Index can be found by visiting http://www.goldengateway.com/press/press_release_06_16_08.php and clicking on the table.

            One Year    Age       2007       2008     Reduction
            Change in  (2007-    Upfront    Upfront      in
            Home Price  2008)     Cash       Cash       Cash
            Index(1)            Available  Available  Available
            ---------  ------  ----------  ---------  ---------
US National     -14.1%  72-73    $125,945   $108,780   ($17,165)
 Index          -14.1%  78-79    $136,835   $118,233   ($18,602)
            ---------  ------ -----------  ---------  ---------
Atlanta          -6.5%  72-73    $125,945   $119,040    ($6,905)
                 -6.5%  78-79    $136,835   $129,284    ($7,551)
            ---------  ------ -----------  ---------  ---------
Los Angeles     -21.7%  72-73    $125,945    $98,520   ($27,425)
                -21.7%  78-79    $136,835   $107,183   ($29,652)
            ---------  ------ -----------  ---------  ---------
Miami           -24.6%  72-73    $125,945    $94,605   ($31,340)
                -24.6%  78-79    $136,835   $102,966   ($33,869)
            ---------  ------ -----------  ---------  ---------
New York         -7.4%  72-73    $125,945   $117,825    ($8,120)
                 -7.4%  78-79    $136,835   $127,975    ($8,860)
            ---------  ------ -----------  ---------  ---------
Phoenix         -23.0%  72-73    $125,945    $96,765   ($29,180)
                -23.0%  78-79    $136,835   $105,293   ($31,542)
            ---------  ------ -----------  ---------  ---------

For more information about this study or to access Golden Gateway Financial's industry leading suite of online retirement assessment tools and resources, please visit http://www.goldengateway.com .