The reverse mortgage is gaining popularity and at a much faster pace than what was initially expected when the product was first introduce on the market back in 1989. This is due in large part to the number of celebrities who are endorsing the product. The reverse mortgage is a loan that is secured by one’s home and requires no payment until the borrower dies, sells or moves to another location. In most circumstances, neither the heirs nor the borrowers can ever owe more on the home that it is worth. More than 90% of these mortgages are insured by the FHA’s Home Equity Conversion Mortgage (HECM). Since the inception of the reverse mortgage, over 660,000 loans have been granted to individuals over the age of 62. Statistics today reveal that over one half million of these mortgage loans are still active.
When asked why, some of the reasons that seniors give for looking into this type of program are because they want to pay off debt, existing mortgages or make improvements or repairs to their home. Yet, the AARP conducted a national survey a few years ago and found that a huge number of seniors had sought counseling before deciding to take out this type of loan. Amazingly, a good number of them decided against applying for the reverse mortgage after counseling.
Nevertheless, today reverse mortgages do offer the seniors who have need a way to take equity from their home to meet financial challenges if necessary. At the same time, the mortgage market collapse during 2008-2009 has resulted in changes that have had a major impact on these same consumers. They now have more in the way of choices when it comes to financing their homes but the reverse mortgage has becomes highly complicated and more expensive. For this reason, Congress and the regulatory agencies are demanding more oversight on these loans to ensure that individuals’ rights are protected.