Are reverse mortgages a hard sell?

Milestones point to greater acceptance 

The FAR-authored “History of the Reverse Mortgage“ ticks off a series of milestones for the product in promoting it as safe. The timeline begins in 1961, when the first reverse mortgage was written to Nellie Young in Portland, Maine, by Nelson Haynes of Deering Savings & Loan. Haynes designed the loan type to enable the widow of his high school football coach to stay in her home after her husband’s death.

Other key milestones illustrating a greater acceptance of the product include:

• During a 1969 Congressional hearing on reverse mortgages, University of California, Los Angeles (UCLA) professor Yung Ping Chen supports an “actuarial mortgage plan in the form of a housing annuity” enabling homeowners to remain in their homes while using their home equity.
• In 1984, American Homestead sets the foundation for government-insured reverse mortgages in unveiling the Century Plan – the first mortgage that keeps the loan in place until a borrower permanently leaves the residence.
• In 1987, Congress passes an FHA insurance bill dubbed the Home Equity Conversion Mortgage demonstration – a reverse mortgage pilot program insuring the product.
• 1988: The Department of Housing and Urban Development (HUD) gains authority to insure reverse mortgages through the FHA after the president signs the reverse mortgage bill into law – thereby establishing the reverse mortgage government-insured loan. The following year, the first FHA-insured Home Equity Conversion Mortgage (HECM) is issued to Marjorie Mason of Fairway, Kansas, by James B. Nutter Co. of Kansas City, Mo.
• In 1990, the HECM program has its one-year anniversary, with HUD reporting to Congress that the program is steadily growing.
• In 1997, HECM reverse mortgage lender participation is at its highest number at 195.
• 1998 marks the year that the HECM is officially permanent. The HUD Appropriations Act makes the program official while Congress allots funds for counseling, outreach, and consumer education. Safeguards (such as full disclosure of fees) are implemented to protect borrowers from unnecessary charges.
• In 2000, HUD announces an increase in origination fees to either 2% of the Maximum Claim Amount, or $2,000. The change is implemented to coax more lenders to participate in reverse mortgages because of the higher revenue.
• In 2001, HUD and the American Association of Retired Persons (AARP) team up to begin testing and training approved counselors. They also begin the establishment of consistent HECM counseling policies and procedures.

By 2017, the loan limit for HECM reverse mortgage loans increased from $625,500 to $636,150. This is the first time the HECM lending limit has been raised since President Barack Obama signed into law the American Recovery and Reinvestment Act in 2009. Limits are now evaluated annually and potentially adjusted annually, according to the timeline, with the limit for 2023 set at $1,089,300.

Yet for all the milestones and gradual acceptance, trumpeting reverse mortgages can be a lonely exercise. “Frankly, in our industry, we are the only company, the only brand, that is out there driving consumer awareness,” Moschner said. “We’re spending tens of millions of dollars a year investing on this advertising, and we’re very specific on the types of advertising we put out to drive that education. We explain how the product works, and we try to break down the myths we know people have and call them out.”

In terms of spreading the message, it’s clearly a long game at FAR.