How did reverse mortgage start?

• Posted on April 26, 2010 at 9:17 am

Roger Maris broke Babe Ruth’s single-season home-run record in 1961 but like most things in life, a single act of kindness has a much longer longevity and a more widespread influence than that of fame and ironically these acts of kindness remain obscure.

The earliest reverse mortgage can be traced to Nelson Haynes of Deering Savings & Loan (Portland, ME) who made the first reverse mortgage loan to Nellie Young, the widow of his high school football coach. This event was reported to be motivated by kindness and started a chain of events over the following forty years to extend a helping hand to today’s retirees.

Reverse mortgage helps many retirees in their twilight years to cope with their financial difficulties and help them to have a way in retaining their independence and dignity. And retirees are reaching for this solution in record numbers. According to the National Reverse Mortgage Lenders Association in 2004, lenders originated a record 37,829 HECM loans during the most recent federal fiscal year – a 109 percent increase over the 18,079 loans closed the previous year.

So why would someone want to give out money to the elderly and to wait forever to get back their profits you might ask. The act of kindness may have started this idea but lenders are not charitable organizations and they will not be in business long if they don’t have a return on their investments. So therefore it is crucial that they take heed when calculating the amount they lend based on the value of your home, the potential of the projected appreciation, your age and a number of other factors before giving out the loans. Their profits are really the accrued and compunded interest on the money expected to be paid in full when the homeowner moves or dies.

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