Reverse mortgages have been available to consumers in the United States for nearly five decades. While growing in popularity, the features - as well as the history - of this product are still widely unknown and misunderstood.
Today, federally insured reverse mortgages are more popular than ever and account for approximately 90% of all reverse mortgages issued. The surge in utilization of this program is due largely to numerous consumer education programs launched by AARP, with the help of the US Department of Housing and Urban Development (HUD). With FHA reverse mortgage information readily available, interested home owners are finally able to easily access the facts they need.
The first reverse mortgage loan was extended in 1961 to Nellie Young of Portland, Maine, who was the surviving spouse of local resident Nelson Haynes' high school football coach. Haynes, a Deering Savings and Loan employee, created this loan specifically for the widow as a compassionate gesture to help ease the emotional and financial difficulties Nellie faced as a result of her husband\'s passing. This simple act of kindness began what has today helped countless individuals remain in their homes by utilizing their own equity.
In 1977, bank president Arlo Smith introduced the Equi-Pay Loan - the first publicly available reverse mortgage program - through Broadview Savings and Loan in Independence, OH. The loan allowed homeowners to borrow up to 80% of their property's value, financed at the existing market rate. The loan allowed disbursements for a specified period ranging anywhere from five to ten years, and the loan was due in full at the end of the term chosen.
The following year (1978), Ken Scholen headed the Reverse Mortgage Study Project, which was funded by the Wisconsin Bureau on Aging. The Reverse Mortgage Development Conference was sponsored by the same agency in 1979 and a new deferred payment loan program, which simply allows repayment to be deferred for the life of the loan, was developed by the Wisconsin Department of Development's Neighborhood Conservation Program. This marked the first statewide offering of a deferred payment loan program.
Ken Scholen was not only involved in several studies and programs on reverse mortgages over the years, but also edited Unlocking Home Equity for the Elderly in 1980, together with Yung-Ping Chen, and headed The National Center for Home Equity Conversion (NCHEC), incorporated in 1981. The NCHEC, an independent, non-profit, national organization, was developed as a means to allow older Americans direct access to their equity.
National availability of reverse mortgages was made tenable by certain provisions in the Garn-St. Germain Depository Institutions Act of 1982 and the first statutory recognition of the program on a federal level occurred. Two years later, American Homestead in New Jersey made available the first open-ended reverse mortgage. With this type of financing, the date that the loan became due was based upon an anticipated life event, rather than a predetermined number of years.
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