The History of the Reverse Mortgage

The National Housing Act of 1987 outlined the specifics of what would become an extremely valuable piece of legislation to provide financial assistance to the elderly.  The Act intended to “meet the special needs of elderly homeowners by reducing the effect of the economic hardship caused by increasing costs of meeting health, housing, and subsistence needs at a time of reduced income, through insurance of home equity into liquid assets.”  Thus began FHA insurance of Reverse Mortgages and many other safeguards to create a safe environment for seniors to obtain needed funds to enjoy a better lifestyle.

Then in 2008 the Housing and Economic Recovery Act (HERA) was passed.  This Act provided additional safeguards for seniors seeking a Reverse Mortgage.  A significant provision of this act requires independent counseling of persons wishing to obtain a Reverse Mortgage.

Prior to the enactment of The National Housing Act of 1987 and the Housing and Economic Recovery Act, there were documented cases of maltreatment that fostered distrust of the Reverse Mortgage concept by the public.  As a result of these abuses, myths were born.

Unfortunately, many of these myths still circulate.  

Here are three of the more prominent myths and the explanation of actual safeguards for senior citizens seeking the benefits of a Reverse Mortgage:

MYTH:  Homeowners give up title and, therefore, no longer own their residence when they obtain a Reverse Mortgage.

TRUTH:  The homeowner retains title and can, therefore, do anything consistent with the rights of any title holder of any real estate, as long as the home is the primary residence of the homeowner.

MYTH:   The homeowner can outlive the loan.

TRUTH:  The National Housing Act of 1987 provides a guarantee by the federal government which allows a homeowner to remain in his/her home even though the Reverse Mortgage balance exceeds the market value of that home.

(2)

MYTH:  Homeowners are often unduly influenced by unscrupulous lenders to obtain a Reverse Mortgage without proper explanation and counseling.

TRUTH:   The Housing and Economic Recovery Act requires mandatory counseling by those certified and trained to determine that each applicant understands the nature and provisions of the Reverse Mortgage they seek.

The Reverse Mortgage industry has come a long way since the 1960’s when the concept was first promoted.  It is true there were abuses in those early days. The National Housing Act of 1987 and the Housing and Economic Recovery Act took the sting out of what was once a “wild and wooly” market place.  Senior citizens can rest easy that their interests are protected. Hopefully, the myths, that once mirrored reality, will dissipate. Truth will win out.

CALL ME FOR A FREE CONSULTATION TO DETERMINE IF A REVERSE MORTGAGE MAY BE OPTIMAL FOR YOU, YOUR FAMILY OR FRIENDS

MIKE KIRKLAND
(909) 273-5556 / (760) 407-6740
jmkirkland1@gmail.com

BRE#: 01723180
NMLS#: 1205678

HOME FINANCING, INC.
NMLS#: 60506

 

 

 

Photo by rawpixel on Unsplash