The Reverse Mortgage in the Beginning
by Jeffrey L. Bangerter
September 8th, 2008
The reverse mortgage loan was created by the Federal Home Loan Bank in January 1979.
Its mission was to fund installments to reverse mortgage borrowers that would use existing equity in the home as collateral.
The reverse mortgage lender would receive repayment when the property was sold. The reverse mortgage loan program has always been an attempt to alleviate the shortfall in a senior’s budget.
Arrangements could be made to receive either monthly payments or a lump sum from the reverse mortgage lender.
Although it was possible to apply for a reverse mortgage loan from 1979 to 1989, it was very difficult to get one.
On July 24th, 1989 the Federal Housing Administration (FHA) introduced an experimental program to insure a limited number of reverse mortgage loans, called Home Equity Conversion Mortgages (HECM's), with restrictions to protect the reverse mortgage lender and reverse mortgage borrower.
By the time the program ended six years later HUD had pledged FHA mortgage guarantees on 25,000 reverse mortgage loans.
Now the full faith and credit of the U.S. government stood behind each reverse mortgage loan.
HUD continues to expand the program and in 1998 declared the Home Equity Conversion Mortgage (HECM) a permanent HUD program.
In September of 1999 the number of active HECM reverse mortgage loans was approximately 40,000.
Convinced that after 20 years of experimenting the country was ready for wide-scale use, HUD announced its intention to guarantee 1 million new FHA-insured reverse mortgage loans over the next 5 years.
No Place Like Home: A Report to Congress on FHA’s Home Equity Conversion Mortgage Program was the last in a series of mandatory reports to Congress on the demonstration phase of the HECM program.
The report indicated several factors that could increase the volume of HECM loans:
- The costs for the loan continue to decline.
- FHA loan limits are increased.
- Public awareness of the revese mortgage loan program is raised.
With the number of people reaching their 60’s and older increasing as the baby boomers grow older, it is predicted there will be widespread use of the reverse mortgage loan as a major financial planning tool.
If you want to use this financial planning tool, Call a live person at 866-309-6626 or fill out the free quote form to get your best reverse mortgage loan.