A professor at the American College of Financial Services has written a new column detailing the history of reverse mortgages, extending further beyond the Housing and Community Development Act of 1987 signed into law by President Ronald Reagan in February of 1988 by over 25 years.
Appearing at Forbes, Dr. Wade Pfau – who also serves as a principal at McLean Asset Management, and who has researched widely on reverse mortgages – gives a broad recap of some of the major moments across the history of reverse mortgages in the United States, focusing specifically on the Home Equity Conversion Mortgage (HECM) offering and not certain kinds of programs offered by local governments, or proprietary “jumbo” loans that have recently been gaining more prevalence in the industry.
Pfau points out for readers that the standards governing the HECM product have shifted considerably over its government-sponsored history, noting that “descriptions of the [HECM] program can quickly become outdated, even if they are only a couple of years old.”
He cites the program changes enacted by the U.S. Department of Housing and Urban Development (HUD) in October 2017 as one of the most visible points of change the program has experienced in its history, saying that loans originated prior to the new rules do not, “reflect important characteristics of the program for loan applications made since [October 2017].”
Pfau also detailed that many older resources surrounding reverse mortgage products reference HECM Saver, introduced in 2010 but incorporated back into the standard offering by September of 2013. “[HECM Saver] represented a step toward encouraging less up-front use of reverse mortgage credit, but it went largely unused by borrowers,” he said.
Pfau also details various times at which the government implemented new penalties and limits, along with changes in upfront costs, and the scenarios that largely preceded many of the major changes the product has experienced over the course of its existence.
Read his short, yet comprehensive look at the history of reverse mortgages at Forbes.
Written by Chris Clow