federal housing authority
The History of Reverse Mortgages and Why They Are So Popular Today in Los Angeles, California
October 4, 2009 by Philip Lipp · Leave a Comment
Reverse mortgages have been around since 1961. The first person to receive a reverse mortgage was Nellie Young through the Deering Savings and Loan Bank of Maine. At that time, the reverse mortgage was issued through the bank itself and any bank could choose whether or not they would do a reverse mortgage. Not a lot of people took advantage of reverse mortgages because there was nothing to guarantee that a bank wouldn’t take advantage of them. Banks also found some risk in doing reverse mortgages because there was nothing to guarantee that the borrowers fully understood what they were doing when taking out this reverse mortgage. The whole system still had a few issues to be worked out.
In 1988 the federal government stepped in and worked out a new law with the AARP to help increase the use of reverse mortgages under government supervision. The law was the Federal Housing Authority Insurance Program where 50 different lenders were chosen across the country to participate in giving out reverse mortgages. It wasn’t until 1989 that the first government supervised reverse mortgage was given out.
As people learned about reverse mortgages, they became more popular. In 1998 the pilot program became an official program that all lenders could participate in. The reason reverse mortgages became so popular is because they allow senior citizens who own a home and have retired to access the equity of their home without any real risks to them. When they are no longer living in the home for whatever reason, the house is then either sold or the family can choose to refinance the mortgage. If the house doesn’t sell for the amount that the reverse mortgage was for, there is no obligation to pay back the difference.
