A mayor in a region of New Zealand, who recently suggested using reverse mortgages to fund various cost-of-living increases faced by the nation’s retirees, is pushing back against the backlash his comments created.
Tim Cadogan, who serves as mayor of the Central Otago district in south central New Zealand, recently fielded a question from a constituent about rising rates that are akin to U.S. property taxes.
After suggesting that reverse mortgages could be employed by qualifying borrowers to help pay for the rate increases, local media reported that he has received a raft of backlash that accuses him and other elected leaders of being “out of touch.” Another labeled the suggestion “disturbing.”
But in the following days, Cadogan has pushed back on these claims, penning an op-ed that further explains the suggestion while telling local media that certain constituents are “asset rich and cash poor.”
“I was accused by one of the speakers of being out of touch with reality. But, here is the reality of what I was faced with more than once during the drop-in sessions; an elderly person telling me that the proposed rates increases on top of all the other bills that have skyrocketed in recent times would mean they couldn’t afford food or heating,” he wrote in a weekly column published June 8.
Cadogan also spoke about the suggestion to local TV news reporters, saying that councillors across the country are facing a “perfect storm of increased regulation, increased compliance and increased costs.”
The nation’s pensioners, in particular, faced with absorbing these higher costs on a fixed income, expressed concerns about the scenario. That’s when Cadogan made his reverse mortgage suggestion.
“A lot of people said it was an outrageous thing for me to say, whereas I’d suggest it’s something that I said in an outrageous situation,” he told TVNZ reporters this week.
New Zealand maintains both broad similarities and key fundamental differences between its reverse mortgage offerings and the predominant U.S. offerings under the Home Equity Conversion Mortgage (HECM) program.
While the HECM program is sponsored by the Federal Housing Administration (FHA) inside the U.S. Department of Housing and Urban Development (HUD), reverse mortgages are primarily offered by private institutions in New Zealand.
Regulations are generally considered to be less strict than in the U.S., and despite the lack of market penetration stateside, the product category sees even less utilization per capita in New Zealand.
Most seniors in New Zealand are supported by the nation’s Superannuation Fund (NZ Super), which may only cover the costs of bare essentials and little else. Rising costs of food and energy have struck seniors around the world, leading to an increase in reverse mortgage adoption in 2022 by Heartland Bank, the leading regional lender in New Zealand and Australia.
