The HECM program was designed to allow seniors to purchase a new principal residence and obtain a reverse mortgage within a single transaction.
This week Congress passed a reverse mortgage reform bill designed to both help retirees and improve the soundness of the program.
Reverse mortgages are so complex that borrowers frequently don’t understand what they’re getting into, the CFPB says.
Reverse mortgages used to be something elderly widows considered when they were desperate to pay the bills in their waning years. Today — for better or worse — these complex loans are becoming a key factor in many people’s retirement planning.
The demographics of reverse mortgage borrowers have changed significantly in the last decade. The average age of borrowers in 2003 was 74. By 2009, the average age had dropped to 63. Of the homeowners who went through the Home Equity Conversion Mortgages, or HECM, counseling program in the fall of 2010, 46 percent were younger than 70, and 21 percent were leading-edge baby boomers ages 62 to 64.