Exploring the History of Reverse Mortgages
Ever wondered how the reverse mortgage came to be? It all started back in 1961 with a widow named Nellie Young and a banker named Nelson Haynes. Haynes, who worked for Deering Savings & Loan in Portland, Maine, wrote the very first reverse mortgage to Mrs. Young to help her stay in her home after her husband – who happened to be Haynes’ high school football coach – passed away. Since then, the concept of reverse mortgages began to grow in popularity.
The topic of reverse mortgages is discussed by the Senate Committee on Aging at a 1969 congressional hearing. The committee is intrigued by the concept and the chairman shows a great deal of interest. Still, reverse mortgages haven’t fully taken the industry by storm.
It wasn’t until the 1970s that reverse mortgages really began to pick up steam, with many private banks offering them as part of their line of products. During this time, reverse mortgages helped a lot of seniors; however, they lacked the same protections that are now standard in today’s reverse mortgage products.
As more and more private lenders began offering reverse mortgages, the government began growing concerned over their lack of regulation. Many believed reverse mortgages should have a set of standards that all reverse mortgage lenders should follow, as well as FHA insurance. In 1983, the first congressional hearing on reverse mortgages takes place. At this hearing, the Senate approves a proposal by Senator John Heinz to have reverse mortgages insured by the FHA.
In 1987 Congress passed the FHA insurance bill, which would insure reverse mortgages. The following year, President Ronald Reagan signed the FHA Reverse Mortgage bill into law. In 1989, the very first FHA-insured reverse mortgage (or Home Equity Conversion Mortgage / HECM) was written.
Reverse mortgages have been around for 30+ years now, and have had their share of negative press. Now, thankfully, new regulations and tighter lending standards have made HECMs a safer, more valuable financial solution for senior homeowners. Here are a few of the biggest benefits to choosing a reverse mortgage today:
- No monthly payments on your home*
- You still own your home
- HECMs are federally insured
- Your heirs are not responsible for paying the debt when you’re gone
- Does not affect entitlements like Social Security or Medicare**
*You are still responsible for paying your homeowners insurance premiums and property taxes. Failing to fulfill these obligations may result in the reverse loan being called due or entering into default.
**May affect Supplemental Security Income (SSI) or Medicaid. Speak with a financial advisor for details.