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Meeting the Mortgage Needs of Retiring Americans
Wednesday, September 23, 2015 6:20 AM

In about the time you've already devoted to reading this article, another Baby Boomer will have turned 65.

Assuming he or she is retired, as the majority are at that age, earned income has taken a big fall. Maybe they're already drawing Social Security or maybe not. Would your credit union offer a mortgage to this rapidly swelling cohort? Even if a potential borrower documented enough financial assets to buy the property outright two of three times over? Even with a 70 percent down payment? The answer for most credit unions is probably no, not even then. But could you? Maybe.

Since 2011 when the first Baby Boomers started turning 65, roughly 10,000 of their peers have likewise hit that benchmark age each and every day. That's about one every eight seconds. And according to a January 2015 survey by Gallup, 61 percent of those Americans are no longer in the workforce. (It might even be a bit higher than that. Gallup noted that the number of those reporting they were still working included those looking for work and those working part time.) The working/not working ratio hits 50/50 at age 63, Gallup's survey found.

What's the significance of these figures? Just that at the point of retirement from the workforce, a person's earned income obviously will decline. And while about half of Americans start drawing Social Security by the time they are 63, the average benefit as of May 2015 for all retirees was $1,334 a month, says the Social Security Administration. Even with the average spousal Social Security benefits raising that to about $2,000 for a two-person household, it's not exactly an income that's going to grease the way to a new mortgage. So something else has to come into play to write a mortgage for this hypothetical borrower.

With today's low interest rates killing income from CDs and money market funds, that "something else" is likely to be financial assets—brokerage accounts, retirement plans, bank accounts, and the like. Both Fannie Mae and Freddie Mac have programs allowing lenders to use those assets to produce a "virtual" monthly income that could help qualify a borrower for a loan.

Credit unions with less than $2 billion in assets and fewer than 500 first mortgages the previous year also can take advantage of more flexible qualifying standards under a "small creditor" provision in the federal rules.

Find out more by downloading a special report on Meeting the Needs of Retiring Americans.

This info provided by CU Members Mortgage, an approved business partner of Credit Union Resources, Inc. For more information on CU Members Mortgage, please visit www.cumembers.com.