For the 8,000 baby boomers who retire every day, a new rule by Freddie Mac may be good news. The government-sponsored enterprise will allow seniors to take from retirement assets, such as a 401(k) and an IRA, to qualify for a loan without actually liquidating any assets.
For many, this new rule will likely allow them to qualify for a loan that otherwise would be unattainable, as well as help them keep their assets in place.
"Many of these seniors have seen their monthly incomes, heavily dependent on Social Security and limited pension plan payouts, plummet following retirement," the Washington Post explains. "Yet on paper, they look relatively comfortable financially. They've got growing IRA and 401(k) retirement account balances, swelled by recent stock market gains. They often have solid equity in their homes, good credit scores and at least modest savings."
By helping retirees avoid liquidating their retirement funds, many individuals may be able to continue to stay financial stable post-retirement. This new rule may also require financial institutions to adapt and use information differently than they have in the past. Additionally, these new changes may also require lenders to look more into borrowers' qualifications, since more will be able to qualify for loans. With credit and risk management software, lenders can use increased information to determine if a borrower is likely to pay back a loan and stay profitable as lending standards ease. Lastly, with an increase in applicants due to these new rules, loan application software is also necessary so companies can handle the growth while lending to those most qualified.