The Evolution of the Reverse Mortgage: 1961 to Today
Since its introduction in 1961, the reverse mortgage has changed and developed into an important loan option that has now been used by more than a million households. The first reverse mortgage loan was written by Nelson Haynes of Deering Savings & Loan to widow Nellie Young, enabling her to stay in her home despite the loss of her late husband’s income. The program slowly grew in popularity in the 1970s, as private banks started offering reverse mortgage loans — before Federal Housing Administration (FHA) insurance* was implemented.
Before evolving into the financial tool we know today, the reverse mortgage has hit numerous developmental milestones over the years — advancing with process and product improvements, and greater consumer awareness, while redefining the financial possibilities available to homeowners and homebuyers age 62 and older.
Reverse mortgage timeline
1987: Congress passes an FHA* insurance bill called the Home Equity Conversion Mortgage (HECM) Demonstration — a pilot program that insures reverse mortgages. President Reagan signs it into law in 1988.
1989: The first federally-insured Home Equity Conversion Mortgage is issued.
1994: Lenders are required by Congress to disclose the total annual loan costs to borrowers at the beginning of the application process. This gives borrowers the opportunity to compare lenders and shop around for the best interest rates and fees.
1997: The National Reverse Mortgage Lenders Association (NRMLA) is founded, with a mission to educate consumers about the pros and cons of reverse mortgages, advocate for the highest ethical and professional standards among reverse mortgage lenders, and advise policy makers on reverse mortgage issues.
1998: The U.S. Department of Housing and Urban Development (HUD)* Appropriations Act makes the HECM program official, while Congress allocates funding for counseling, education and outreach for consumers. Safeguards like full disclosure of fees are put in place to protect borrowers from excessive charges.
2001: HUD teams up with the American Association of Retired Persons (AARP) to create uniform HECM counseling policies and procedures, and test and train approved counselors.
2008: The $417,000 national loan limit is established.
2009: The lending limit increases to $625,000 — a major milestone for high-value markets.
2010: Inspired by recent product advances that made reverse mortgages more attractive, as well as concerns about retirees “running out of money” in their later years, financial researchers at leading universities begin to examine reverse mortgages as a risk management tool. As a result, they and financial advisors start to develop groundbreaking financial planning strategies using reverse mortgages.
2013: HUD rolls out new HECM policies that strengthen consumer protections, including new limitations on the amount of funds a borrower can take at closing and in the first year. This is designed to help extend the life of the borrower’s home equity.
2014–2015: HUD implements and clarifies protections for non-borrowing spouses who meet certain criteria, allowing them to remain in the home if the borrowing spouse passes away or no longer resides at the property. As with any mortgage, they must meet their loan obligations, keeping current with property insurance, taxes, any homeowners association (HOA) fees, and maintenance
2015: To help protect potential borrowers and reduce default rates, lenders are now required to perform a financial assessment on each application, helping to ensure that borrowers have the means to meet their ongoing loan obligations — which includes paying for their property taxes, homeowners insurance, any homeowners association fees , maintenance and upkeep, and other home-related expenses.
2017: The loan limit for HECM reverse mortgage loans increases from $625,500 to $636,150 for eligible borrowers. It marks the first increase in the HECM lending limit since 2009, when President Obama signed the American Recovery and Reinvestment Act.
A reverse mortgage can help shape your future
Whether you’re preparing for retirement or helping a loved one plan for the next phase of their life, RMF can help secure the financial resources that can assist in providing peace of mind in the years ahead. To find out more about reverse mortgages, call 888-277-1567 for a convenient phone appointment with a licensed reverse mortgage specialist.