History of Reverse Mortgage
History of Reverse Mortgages
The origins and history of reverse mortgages shows a loan product that has evolved dramatically over the last 40 years. The first reverse mortgage loan was written in 1961 by First reverse mortgage loan made by Nelson Haynes of Deering Savings & Loan (Portland, ME) to Nellie Young, the widow of his high school football coach helping her to stay in her home despite the loss of her husbands income.
The need for reverse mortgages was further developed in the 1970’s with several private banks offering reverse mortgage style loans. These programs gave seniors money from their home but did not afford the protections of today as no FHA insurance had been put in place.
In the early 1980’s the U.S. Senate Special Committee on Aging issued a report stating the need for a standardized reverse mortgage program. Other committees throughout the mid 80’s cited the need for FHA insurance and a uniform lending practices. In late 1987 Congress passed the FHA insurance bill that would insure reverse mortgages. On February 5, 1988 President Ronal Reagan signed the FHA Reverse Mortgage bill into law. In 1989 the first FHA-insured HECM made to Marjorie Mason of Fairway, Kansas by the James B Nutter Co.
Since 1989 reverse mortgages have grown in popularity, especially in the mid to late 1990’s. Despite economic upheaval and forward mortgage lending issues, reverse mortgages have continued to grow as a safe, government-insured program allowing seniors to access a portion of the equity in their homes while never making a payment.
Learning from our “senior pioneers” – past and present.
Once again seniors are blazing new financial trails – this time with reverse mortgages. Many of today’s seniors and/or their parents also pioneered the concept of the 30-year loan.
In the early 1900’s it was quite difficult for individuals to obtain mortgages. A down payment of 50% was usually required and the mortgage was a 5 year, interest only balloon mortgage. However, during THE GREAT DEPRESSION, banks lost the ability to lend and mortgage banking in this country came to an end.
Roosevelt’s New Deal helped to restore the public’s confidence in the mortgage banking industry by offering a U.S. Government insured, 30-year loan with standard interest rates and standard underwriting guidelines.
Our seniors were signing newly created documents and taking on 30-year loans. This was historic! Considered as standard today, these loans were a very different concept back then. People were warned that they would lose their homes or that they would go broke if they signed these “hard to understand” mortgage documents.
Now let us fast forward to the present. There is this new financial concept that many seniors are now exploring. While reverse mort- gages have been around since the early 1960’s, they were unregulated and took on many forms and were called by different names. Relatively few were done. It wasn’t until 1989 that Congress authorized the first government insured reverse mortgage. Now seniors are being asked to sign documents that attorneys, accountants and financial planners have not seen before. Seniors are being told that if they get a reverse mortgage they will lose their home. Who says that history does not repeat itself?
Just like the 30-year mortgage changed the financial life for many of our ancestors, the reverse mortgage is doing the same for seniors. In fact, the number of seniors obtaining this type of financing is doubling each year. Years from now, when we look back on the evolution of this product, people will wonder what all the fuss was about. These pioneers have twice shown us that financial innovation can have a profound affect upon American society.