What about this op­tion?


It’s an en­chant­ing sum­mer evening on the pa­tio, you’re joined by guests, and So­phie says, “I’mgo­ing to do a re­verse mort­gage,” and eyes quickly be­gin dart­ing around the ta­ble.

The re­verse mort­gage is the most mis­un­der­stood fi­nan­cial mort­gage prod­uct on the mar­ket. It is de­signed for a bor­rower that is 62 years of age or older and gives the bor­rower ac­cess to a per­cent­age of the eq­uity in the home. The bor­rower de­fers pay­ment of the loan un­til he or she dies, sells, or moves out of the home.

The in­dus­try did it to it­self back in the early ‘60s with self­ish de­ci­sions and an eye for prof­its over ethics. In 1983, the Se­nate ap­proved a pro­posal by Se­na­tor John Heinz to have re­verse mort­gages in­sured by the Fed­eral Hous­ing Ad­min­is­tra­tion (FHA), the in­sur­ance arm of the U.S. Hous­ing and Ur­ban De­vel­op­ment De­part­ment, and in 1987 an in­sur­ance bill, the Home Eq­uity Con­ver­sion Mort­gage, was passed. In try­ing to pro­tect se­nior ci­ti­zens, as leg­is­la­tion so of­ten does, it ended up low­er­ing the “prin­ci­pal lim­its” or the loan amounts that could be ac­cessed from the se­nior’s home eq­uity. Many of the se­nior­swho ap­ply today and would have qual­i­fied for the pro­gram prior to Oct. 2, 2017, are now not able to take ad­van­tage of the higher lend­ing lim­its.

With today’s chang­ing de­mo­graph­ics — 10,000 to 11,000 baby boomers turn­ing 65 daily, em­ployer pen­sions al­most non-ex­is­tent, govern­ment pro­grams in flux, de­creas­ing sav­ings plans, and peo­ple liv­ing longer lives— re­tire­ment has be­come a world­wide cri­sis, and out of reach for many. A few of the world’s lead­ing economists see the re­verse mort­gage as an an­swer to this ever-grow­ing problem.

Fast for­ward to today— HUDhas con­tin­ued to make changes to the pro­gram for the pro­tec­tion of our se­niors. Over the com­ing months we’ll ex­plore how the re­verse mort­gage works, when it’s an ap­pro­pri­ate so­lu­tion, and when you need to look at other al­ter­na­tives. Re­verse-mort­gage clients are re­quired to live in and main­tain the prop­erty, pay taxes, in­sur­ance, and any HOA dues. But if you qual­ify, you will not make prin­ci­pal and in­ter­est pay­ments for the rest of your life, if you so choose, and that will surely make you smile!

Dirk Gray is a re­verse-mort­gage spe­cial­ist with FrostMort­gage and an ac­cred­ited in­struc­tor for the New Mex­ico Real Es­tate Com­mis­sion. He can be reached at 505-9301953 or dirk_gray@frostmort­gage.com.

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