The reverse mortgage has evolved dramatically over the last 40 years. In 1961, Nelson Haynes (of Deering Savings & Loan, Portland, ME) originated the very first reverse mortgage loan to Nellie Young, the widow of his high school football coach to help her to stay in her home despite the loss of her husband’s income.
In the 1970’s, several private banks began offering reverse-mortgage-style loans. While these programs did give seniors money from their home, they did not include the protections we have today as no FHA (Federal Housing Administration) insurance had yet been created.
Committees in the 1980’s, including the U.S. Senate Special Committee on Aging, began citing the need for a standardized program with FHA insurance and uniform lending practices.
In late 1987, Congress passed the FHA insurance bill that would insure reverse mortgages. On February 5, 1988, President Ronald Reagan signed the FHA Reverse Mortgage bill into law as a pilot program, allowing banks to make their own rules and charge their own interest rates.
It is our opinion that many lenders took advantage of seniors with high rates (some even reaching upwards of 15%) and equity sharing. Even today, the practices by predatory lenders of the 1990s are a difficult stigma to dispel.
The FHA and HUD (U.S. Department of Housing and Urban Development) began instituting a series of specific rules and safeguards for seniors. These important changes included the insurance that drives lower interest rates by lenders, no junk fees, such as underwriting or processing fees, and most importantly, the title of your home stays in your name, and 100% of the remaining equity will pass on to your heirs.
The Reverse Mortgage with all of these rules and safeguards built in is known as the Home Equity Conversion Mortgage, or HECM (pronounced “heck’m”). Each year, tens of thousands of seniors achieve greater financial stability in their retirement through this government-insured reverse mortgage. The total number of reverse mortgages has nearly reached 1 million – already this year over 40,000 loans have closed (Annual HECM Endorsement Chart).
As with most government-regulated programs, the HECM is regularly reviewed and altered – new proposed regulations could mean you might qualify for thousands of dollars less in the future than you might today. Don’t wait to find out – call one of our Specialists now to learn how a Reverse Mortgage can best serve you!
*Borrowers must continue to pay property taxes, homeowner’s insurance and other property obligations complying with HUD’s requirements for the loan. Failure to do so may result in foreclosure.