The Reverse Mortgages were offerred since 1960s with bad features and it carried bad name for a long time. Between 1960s to 1990s, it seemed almost disappeared. However, what most of us didn't know about the reverse mortgages is that in 1989, HUD/FHA stepped in and made huge changes and cleaned up all disadvantaged features in reverse mortgage programs. The reverse mortgage programs are designed to protect senior borrowers to stay in their own home for as long as they wish and of course lenders as well.
For examples of features; 1. Fixed percentage of Margins a lender can charge 2. Interest Cap ceilling 3. The lenders can't claim for property appreciations 3. The cap on Origination fees 4. The cap on Mortgage Insurance Premiums (MIP) 5. The borrower Counselling requirement 6. The borrower Face to Face interview requirement with either Counselor or Reverse Mortgage Specialist 7. Use of FHA approved appraisers 8. Age limits to 62 and older 9. Use of Primary Resident as collateral 10. Limit the Max loan amount (Property Value) etc..
The reverse mortgages are used by (my experiences) either "House Rich and Cash Poor" seniors as for more cash flow and pay for living expenses or "Financially Well Off" seniors who needs a lump sum for other purposes like; purchase second home, home improvements, help children with down payments for property purchase,buy a large items, invest in Grand Children's 529 college funds, purchase Long-Term Care Insurance, A large sum donation to charitable etc. the use of the funds are very various.
Bottom line, the reverse mortgage is a beautiful program and wonderful financial options to seniors, and it is an awesome tool to increase the businesses for real estate agents and mortgage loan officers, and Long Term Care Insurance agencies as well. If you work with a smart financial adviser and attorney, they include the reverse mortgage option in their financial planning portfolio.
Just to give you a brief picture of the reverse mortgages demand trends in recent years only on FHA loans (originated); 2003-21,636; 2005-48,493; 2006-85,639; 2007-108,293, 2008-115,176, 2009-96,365 as of April and expected to originate 115,000 plus by end of year. Source HUD.
Useful web site for more information; www.songhutchins.com, www.aarp.org, www.reversemortgage.org.
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