Reverse Mortgage Facts
The most important factor required to qualify for a reverse mortgage is the age which should be at least 62 years old. The other factor is the equity in the home which must be about 40%.
The History of Reverse Mortgages
*1961: The first instance of the reverse mortgage by Deering Savings & Loan in Portland.
*1970’s: Several private lenders presented some type of reverse mortgage.
*1983: A proposal for a Federal Housing Administration (FHA) supported mortgage program was made by the United States Senate Special Committee on Aging
*1984: A program that permitted borrowers to stay in their homes was created by American Homestead.
*1987: The Home Equity Conversion Mortgage (HECM) started as a model program as a part of the Housing and Community Development Act.
*1988: The act allowing HECM to insure reverse mortgages was signed by President Ronald Reagan.
*1998: The HECM program, though was still running as a model, became permanent. The FHA was given the authority to insure up to 150,000 reverse mortgages per year.
*2000's: Originations grew from less than 10,000 per year in the 1990s to more than 114,000 in 2009.
*2011: The number of reverse mortgages the FHA could insure was increased from 150,000 to 275,000 reverse mortgages per year, although annual demand had not reached that level.
*2012: The reverse mortgage market is primarily non-depository institutions offering HECM loans.
*2014: The reverse mortgage rules for a non-borrowing spouse to prevent the loan foreclosure were implemented.
*2015: The financial assessment rule was implemented. It requires the borrowers to submit records showing income, payment of taxes, assets, history of payments and other debt to lenders to evaluate financial capacity to pay mandatory obligations.
*2015: 56,363 homeowners obtained reverse mortgages, $9.3 billion in financing, $168,400 average principal limit at 3.38% Average Interest Rate.
Reverse Mortgages Facts by Statistics
*2009: Half of eligible homeowners for a reverse mortgage had at least 50% net equity in their homes.
*2011: 73% borrowers chose a lump sum payment. And borrowers who want a lump sum payment are more likely to face foreclosure because it would be hard to keep up with taxes or insurance.
*2012: As at February, 10% of seniors with a reverse mortgage had defaulted or been in foreclosure and at risk of forfeiting their homes as a result of failure to pay property taxes and homeowner’s insurance.
*2013: There were more than 700,000 reverse mortgages outstanding, and 90% being HECM loans.
Beneficial Rules of the Reverse Mortgage
The reverse mortgage is non-recourse indicating that;
- No other assets of the borrower can be taken apart from the home to pay off the loan if it is not repaid after becoming due.
- The borrower or heirs will not be made to pay for any deficiency arising from the total loan debt and the home value.
Common Mistakes about Reverse Mortgages
- Most borrowers do not understand the reverse mortgage they obtain according to the Consumer Finance Protection Bureau (CFPB).
- It is riskier to take out a reverse mortgage earlier in life because borrowers who take out a large lump sum at closing may be left with no equity remaining later in life.
- Many seniors invest their lump sum payments at interest rates that are lower than the reverse mortgage’s terms.
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