In a press release on November 1st The National Reverse Mortgage Lenders Association applauded the Federal Housing Administration for insuring more that
one million reverse mortgages through its Home Equity Conversion Mortgage program.
FHA endorsed 3,919 loans in October 2016, which brings the total number of older homeowners who have benefited from FHA-backed reverse mortgages to 1,002,679.
“As an industry, we are proud to offer a financial product that helps older adults supplement their retirement funds while living in their own homes,”
said Peter Bell, NRMLA president and CEO. “We are grateful to the U.S. Department of Housing and Urban Development, and especially the work of the
late Ed Szymanoski, for modeling the original pilot program that made the HECM program possible.”
The sad part of this story is that it has taken 27 years to reach this milestone. As an industry, reverse mortgage professionals have done a very poor
job of getting the word out about the benefits of this program. Less than 2% of the people who are qualified to get a reverse mortgage have done so.
In 1988, section 255 of the National Housing Act authorized HUD to create a program:
“To meet the special needs of elderly homeowners by reducing the effect of the economic hardship caused by the increasing cost of meeting health, housing,
and subsistence needs at a time of reduced income, through issuance of home equity conversion mortgages to permit the conversion of a portion of accumulated
home equity into liquid assets…”
In a nutshell, the housing department of the government saw the benefit of allowing people age 62 and older to be able to tap into a portion of the value
of their home without having to pay it back as long as they live there.
So they went about and set the rules and only allowed FHA approved lenders originate these loans all long as they follow the rules.
Since the first HECM loan was closed in 1989, (the bill was passed in 1988 but the first loan was not closed until 1989), lenders, with very few exceptions,
have followed the rules. Over this time-frame, HUD has continually introduced policies to improve and sustain the FHA-insured reverse mortgage program.
Recent changes have included new protections for borrowers and their eligible spouses, efforts to ensure long-term access to equity to support the
ability to age in place, and the financial review of borrowers.
These changes have been positive and some people are beginning to take notice (see article below), but it’s not enough.
It’s great that the reverse mortgage program has helped one million families, but it should be ten times this amount.
The HECM program has numerous benefits but even more misconceptions and misunderstandings.
My goal it to help people break down the barriers that these misunderstandings create and to educate people about all the ways that a reverse mortgage
can help them.
Unfortunately, there are people in this business who don’t really care if you understand how it works or not, as long as they can convince you to sign.
Education is the key to expanding the program and I believe that if I help people to understand and they benefit from the program, they will, in turn,
tell other people about how it worked for them.
If you haven’t taken the time to learn the facts, please contact me and I will gladly meet with you
to make sure you are making an educated decision.
