Much of the negativity associated with reverse mortgages is a result of practices from the 1980s, when the loan program was not fully monitored by HUD or insured by the FHA. During that time, this type of financing was much riskier for homeowners because it had to be repaid on a specific date, often resulting in the homeowner(s) being forced to sell the home. The reverse mortgage options available during that time which allowed borrowers to remain in their homes were terribly costly and required borrowers to give up a large portion of their home equity, as well as the value of future appreciation.
These risks were eliminated when, after eight long years of intense research and development, the Federal Housing Administration's (FHA) Home Equity Conversion Mortgage (HECM) program became available. The FHA developed the HECM program with our nation's senior homeowners in mind, to keep them right where they belong - in their homes.
Sources:
Department of Housing and Urban Development (HUD) :
http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/88-38ml.txt
HUD Mortgagee Letters 08-24, 08-33, 08-34 and 08-35:
http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/2008ml.cfm
HUD Mortgagee Letter 09-07:
http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/
HUD Handbook 4235.1 REV-1:
http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4235.1/index.cfm
NCHEC History:
http://www.reverse.org/History.HTM
NRMLA:
http://www.nrmla.org/nrmla/default.aspx
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