Reverse Mortgages Now Available to More People in Larger Amounts

Reverse Mortgages: The Choices Expand
By KELLY GREENE and VALERIE BAUERLEIN
November 13, 2007; Page D1

Only a year ago, homeowners interested in reverse mortgages had little to choose from beyond the plain-vanilla, government-backed products that have long dominated the market. Such mortgages essentially allow homeowners at least 62 years old to sell a large chunk of their home equity back to a bank or other lender in exchange for a lump sum, monthly payments or a line of credit.

Now, nearly a dozen large banks and mortgage lenders have launched reverse-mortgage products with lower fees and larger payouts. One lender has reduced the minimum age requirement to 60; others are making loans on second homes and vacation rentals. "Jumbo" reverse mortgages -- for houses valued at as much as $10 million -- are becoming more common.

With a reverse mortgage, instead of the borrower making payments to the lender, the lender makes a payment or payments to the borrower. The borrower keeps control of the house and doesn't have to pay back the money as long as he or she lives there. When the homeowner dies or moves out, the loan is typically paid off by selling the house, and any money left over goes to the homeowner or the homeowner's estate.In the past, the reverse-mortgage market has been constrained by having one main buyer, Fannie Mae. But a half-dozen investment banks, including units of Lehman Brothers Holdings Inc. and Bank of America, have started buying reverse mortgages in the past few years, with plans eventually to package and sell them.

On Thursday, Ginnie Mae, the federal agency charged with making real-estate investment more attractive to institutional investors, said it's rolling out a standardized government bond issue backed by reverse mortgages -- a key step in creating a secondary market that could help lower borrowers' costs and increase the loans' availability.

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