The History Of Reverse Mortgages

History

The origins and history reverse mortgages shows a loan product that has evolved dramatically over the last 40 years. The first reverse mortgage loan was written in 1961 by First reverse mortgage loan made by Nelson Haynes of
 Deering Savings & Loan (Portland, ME) to Nellie Young, the
 widow of his high school football coach helping her to stay in her home despite the loss of her husbands income.

The need for reverse mortgages was further developed in the 1970’s with several private banks offering reverse mortgage style loans. These programs gave seniors money from their home but did not afford the protections of today as no FHA insurance had been put in place.

In the early 1980’s the U.S. Senate Special Committee on Aging issued a report stating the need for a standardized reverse mortgage program. Other committees throughout the mid 80’s cited the need for FHA insurance and a 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. In 1989 the first FHA-insured HECM made to Marjorie Mason of Fairway,
 Kansas by the James B Nutter Co.

Since 1989 reverse mortgages have grown in popularity, especially in the mid to late 1990’s. Despite economic upheaval and forward mortgage lending issues, reverse mortgages have continued to grow as a safe, government-insured program allowing seniors to access a portion of the equity in their homes while never making a payment.

Check Out Wikipedia For More Information and History Of Reverse Mortgages

Reverse mortgage

A reverse mortgage is a type of home loan for older homeowners that requires no monthly mortgage payments. Borrowers are still responsible for property taxes and homeowner's insurance. Reverse mortgages allow elders to access the home equity they have built up in their homes now, and defer payment of the loan until they die, sell, or move out of the home. Because there are no required mortgage payments on a reverse mortgage, the interest is added to the loan balance each month. The rising loan balance can eventually grow to exceed the value of the home, particularly in times of declining home values or if the borrower continues to live in the home for many years. However, the borrower (or the borrower's estate) is generally not required to repay any additional loan balance in excess of the value of the home.[1]

One may compare a reverse mortgage with a conventional mortgage, whereby the homeowner makes a monthly payment to the lender and after each payment the homeowner's equity increases by the amount of the principal included in the payment.

Regulators and academics have given mixed commentary on the reverse mortgage market. Some economists argue that reverse mortgages may benefit the elderly by smoothing out their income and consumption patterns over time.[2][3] However, regulatory authorities, such as the Consumer Financial Protection Bureau, argue that reverse mortgages are "complex products and difficult for consumers to understand", especially in light of "misleading advertising", low-quality counseling, and "risk of fraud and other scams".[1] Moreover, the Bureau claims that many consumers do not use reverse mortgages for the positive, consumption-smoothing purposes advanced by economists.[1] In Canada, the borrower must seek independent legal advice before being approved for a reverse mortgage.

Reverse mortgages are available in Australia. Under the Responsible Lending Laws the National Consumer Credit Protection Act was amended in 2012 to incorporate a high level of regulation for reverse mortgage. Reverse mortgages are also regulated by the Australian Securities and Investments Commission (ASIC) requiring high compliance and disclosure from lenders and advisers to all borrowers.[4]

Borrowers should seek credit advice from an accredited reverse mortgage specialist before applying for a reverse mortgage. Anyone who wants to engage in credit activities (including lenders, lessors and brokers) must be licensed with ASIC or be a representative of someone who is licensed (that is, they must either have their own licence or come under the umbrella of another licensee as an authorised credit representative or employee) (ASIC)[5]