For Families and Advisors of Seniors
(A Brief History of Reverse Mortgages)

The Rapid Expansion 

In 2006, there were over 76,000 seniors who took out federally insured reverse mortgages. This number was preceded by more than 43,000 in 2005 and over 37,000 in 2004. As recently as the year 2000, there were only 6,640 federally insured reverse mortgages nationally taken out by seniors. Why such dramatic increases? This is due in large part to consumer education programs launched by AARP with the support of the U.S. Department of Housing and Urban Development (HUD). AARP’s homeowner education program aims to improve the quality and availability of consumer information and counseling on reverse mortgages and related options. Finally the message is getting through. Seniors and their families are getting the information and real facts on the reverse mortgage of today.

What About the Bad Stuff You’ve Heard: Where Did It Come From and Is It True? 

Rumors that practices from the 1980’s still exist are being dispelled. During most of the 1980’s, reverse mortgages were much too risky for most homeowners. Many of these loans had to be paid back on a specific date, which generally meant that borrowers would have to sell their homes and move at that time. But most older homeowners strongly prefer to remain in their homes for as long as possible, and do not want to risk having to move out before they are ready to do so.

On the other hand, the only reverse mortgages that let borrowers remain in their homes indefinitely were potentially very costly. Typically, they required that borrowers agree to give up a fixed percent of their home equity or future appreciation in the value of their homes.

HECM Reverse Mortgages Now Government Insured  

Seeking a less risky alternative to these loans, AARP led an 8-year effort to develop a federal program of reverse mortgage insurance. Launched in 1989, the Home Equity Conversion Mortgage (HECM) insurance program permits borrowers to remain in their homes for as long as they choose, and without having to pay a fixed percent of their homes’ equity or future appreciation.

Reverse Mortgages for many Is Family Business

Before seniors decide to take a reverse mortgage, many consult with family members about whether the loan will benefit them. It is not uncommon for children and grandchildren to attend our seminars, workshops and even to be present during appointments. On the other hand, some parents are reluctant to discuss their money matters with their children because they think they will be viewed as no longer capable of making decisions.

Some seniors won’t even consider reverse mortgages because they are reluctant to draw down the value of their house, the biggest asset they have to leave their children. If children urge their parents not to worry about inheritance issues, they often begin to explore the possibilities.

Often times, children who are burdened with the financial responsibility of assisting parents hear about a reverse mortgage and think it could relieve them of the burden.

A free counseling session provided by agencies approved by the U.S. Department of Housing and Urban Development, or by a network of AARP trained advisors, may include the family members.

Order Free Consumer Guide

AARP has a 68-page consumer guide to reverse mortgages, Home Made Money. The consumer guide can be ordered online or downloaded from www.aarp.org/revmort/ . Just click the Money and Work tab at the top of the page. Then go to Reverse Mortgage Publication heading in the center of the page and click how reverse mortgages work, or you may order the guide by calling 800-209-8085.