History of the Reverse Mortgage
The reverse mortgage is a unique loan product. Since 1961 to current it has been through numerous developmental changes that has helped many senior homeowners.
A brief history of the Reverse Mortgage. The first reverse mortgage was written by Nelson Haynes of Deering Savings & Loan of Portland, ME in 1961. The client was Nellie Young. Nellie had lost her husband and needed a loan that would allow her to continue to live in her home and keep her home.
1969– UCLA professor named Yung Ping Chen states his support for a “actuarial mortgage plan in the form of a housing annuity” to the Senate Committee on Aging. The Senate Committee on Aging are very interested in the loan product and how it could benefit senior homeowners.
1983– The Senate approves a proposal by Senator John Heinz to have FHA (Federal Housing Administration) insure the reverse mortgage product.
1987– Congress passes an FHA insurance bill called the Home Equity Conversion Mortgage Demonstration. This is the start of FHA insuring reverse mortgages.
1988– President Ronald Regan signs the reverse mortgage bill into law which gives HUD (U.S. Department of Housing & Urban Development) the authority to insure reverse mortgages through the FHA.
1989– The first FHA insured HECM (Home Equity Conversion Mortgage) is issued to Marjorie Mason of Fairway, Kansas by the James B. Nutter Company of Kansas City, Missouri.
1996– The reverse mortgage program allows multiplex dwellings up to four units as long as the borrower occupies one unit as their primary residence.
1998– The HECM loan product is officially permanent with HUD.
2001– HUD and AARP (the American Association of Retired Persons) team up to establish HECM counseling policies and procedures.
2004– FHA implements rules of HECM refinancing.
2005– The first HECM refinances are made.
2006– The national loan limit of $417,000 is established. AARP also conducts a national survey of reverse mortgage borrowers which reveals the primary motivation for obtaining a reverse mortgage is to plan for emergencies and to improve the quality of life.
2008– The first baby boomers turn 62, which results in a surge of the reverse mortgage product. The Housing Economic Recovery Act requires safeguards for consumers for limit on origination fees, rules against cross selling, and counseling independence.
2009– The HECM for Purchase is a reverse mortgage product. For the first time borrowers are allowed to purchase a new home without paying monthly mortgage payments. Congress also increases the HECM loan limit to $625,500
2013– HUD releases new HECM policies to make the reverse mortgage product safe, and less risky by only allowing a borrower to tap into only a portion of their equity for the first year, and the remaining equity after the first year.
2015– HUD implements the Financial Assessment. This requires lenders to analyze the borrower’s income sources and credit history to determine if the borrower must have a mandatory set-aside of funds from the equity to cover the necessary property taxes, homeowner’s insurance, and repairs. This rule protects consumers and reduces the number of borrower who might fall into default from failing to pay their property taxes and homeowners insurance.
2017– The loan limit is increased from $625,500 to $636,150
2018– The loan limit is increased from $636,150 to $679,150. There are also many proprietary reverse mortgage products by lenders for Jumbo Reverse Mortgage ranging from $679,150 to $4+Million
2019– Reverse Mortgage Limit is officially $726,525. HUD released their announcement verifying the news we released on November 28, 2018 raising the Mortgage Lending Limits for HECM Loans.
It’s been 50+ years since the inception of the reverse mortgage. With 10,000 baby boomers turning 65 per day until 2030, there is a strong need for this unique and beneficial product for senor homeowners until 2030 and beyond.