While the first reverse mortgage was granted in 1961, Home Equity Conversion Mortgage (HECM) loans have only been available since 1989. Since that time, over 660,000 HECM loans have been given to consumers, 74% of which were funded in the past five years. According to statistics compiled by the U.S. Department of Housing and Urban Development (HUD), HECM loans make up approximately 90% of all reverse mortgage loans. These loans have become tremendously popular with seniors in a relatively short time, making reverse mortgage information increasingly sought after.
Reverse Mortgage Information: Why Are Consumers Taking Reverse Mortgages?
Of the available reverse mortgage information, experts are especially interested in the reasons consumers have for taking these loans. A 2007 survey conducted for a well-known advocate group for retirees found that 19% of borrowers were primarily interested in using this financial product to pay off their traditional mortgage loan. Eighteen percent hoped to improve their quality of life, 14% needed money for home repairs, and 13% needed the cash to cover an unexpected expense.
Many experts believe that the significant increase in popularity is due to the increase of available reverse mortgage information, consumer protection, and lenders offering these loans. There are also more senior citizens than there were a few years ago. In 1990, 31.2 million American citizens were at least 65 years of age. According to the CIA Factbook, that number jumped to 38.7 million 2008. This number will continue to increase as the baby boomers hit retirement age.
Reverse Mortgage Information on Recent Changes
The increasing popularity of this product has led to several important changes over the years. Until 2006, the great majority of HECM loans were purchased by Fannie Mae. Fannie Mae set the interest rates on these loans and required lenders to give their borrowers adjustable rates.
In 2010, Fannie Mae stopped purchasing these loans. Ginnie Mae, a branch of HUD, took up where Fannie Mae left off. However, this change brought about several other changes. As of 2010, HECM loans were given fixed interest rates and required borrowers to accept their cash as one lump sum. An interesting piece of information is that before 2010, only 3% of borrowers chose to take their money as a lump sum. Today, over 70% of borrowers do so.
In addition to these changes, HECM loan limits were lowered by 11 to 15 percent, depending on a borrower's age. Because loans must be accepted in a lump sum, borrowers are not usually forced to pay service charges. Consumers looking for reverse mortgage information will also be interested to know that, while interest rates increased, origination fees decreased.
October 2010 also marked the introduction of the HECM Saver. This loan product was designed to be a more affordable option for borrowers who need less money from their loan. With the HECM Saver, borrowers are allowed to borrow 10 to 18 percent less than with the HECM Standard. The major benefit is that borrowers will not have to pay large upfront mortgage insurance premiums (MIPs). They will, however, be subjected to higher interest rates and fees.
Consumers seeking reverse mortgage information will want to consider all of their different options. These mortgages are unlike any other type of loan. These loans are typically more complicated and sometimes leave consumers with many important questions. Staying up to date on current trends and information can help consumers decide if and when this product might benefit them.