On the House | Old actors' new line: Reverse mortgages

Posted: August 05, 2007

There seems to be a big reverse-mortgage push on.

The cable stations I watch are running a lot of reverse-mortgage advertising, with actors James Garner and Robert Wagner doing their best to try to convince understandably wary senior citizens that it isn't just another scam.

Why Garner and Wagner, other than the fact that they're up there (79 and 77, respectively) and the fee they're paid for the ads will likely ease the burdens of retirement?

Same reasons why Laurence Olivier appeared in so many mediocre films in the twilight of his career. I enjoyed A Little Romance, too, and I even kissed my wife under the Bridge of Sighs in Venice in a gondola at sunset as the bells of the campanile chimed. But, jeez, this guy was Hamlet and Heathcliff and Mr. Darcy and Lord Nelson. . . .

Will you be more willing to look into a reverse mortgage if Garner (The Rockford Files) or Wagner (Hart to Hart) suggests it than you would if it were being pitched by Billy Mays (OrangeGlow!) or, shudder, Ty Pennington (Mr. Extreme Home Makeover himself)?

That's the hope.

Reverse mortgages haven't yet tapped the home-equity wealth of Americans age 62 and older, an estimated $4.3 trillion, according to the National Reverse Mortgage Lenders Association/Hollister Reverse Mortgage Market Index.

In the last five years, data from the index show, slightly more than 300,000 reverse mortgages have been originated, representing less than 1 percent of market penetration.

The industry, perhaps helped by Jim and Bob, sees that changing.

"The idea of using home equity to finance retirement is becoming increasingly mainstream, even among the current generation of seniors, who have traditionally been debt-averse," said Peter Bell, president of the lenders' group.

A study on debt I wrote about a few years back indicated that the older you are, the more unwilling you are to get into a financial hole. That survey also showed that younger Americans were digging themselves so far into the hole that they might never climb out.

I know that, as I age, I worry about how much money I will have for retirement. My projections at age 56 show that if I keep up present efforts toward debt reduction, I will be able to retire about three weeks after I reach 117.

In the first quarter of 2007, home equity for those 62 and older rose $19 billion, and, in response, the new index rose 0.4 percent.

Congress is now considering legislation to modernize the Federal Housing Administration - action that would pave the way for 2 million older Americans to begin tapping into their home equity. Alphonso Jackson, secretary of the Department of Housing and Urban Development, is calling for the quick enactment of the Expanding American Homeownership Act.

"Reverse mortgages offer seniors the financial freedom they deserve, and this legislation could help 2 million more older Americans turn their homes into retirement nest eggs," Jackson said.

If the act is approved, FHA's Home Equity Conversion Mortgage (HECM) loan limit would equal the Fannie Mae/Freddie Mac conforming loan limit. That would help those with homes valued above the current FHA loan limit of $362,790 but below $600,000 obtain a reverse mortgage through FHA.

To qualify, applicants would need to be age 62 or older, with mortgages that were paid off or had only small balances remaining.

The loan amounts would depend on the value of the homes, the age of the homeowners, and expected interest rates. A reverse mortgage does not have to be repaid until the borrower moves out of the home permanently.

For more information on home-equity conversion, go to http://www.hecmresources.org/, a joint project of AARP and HUD.

And tell them Jim and Bob sent you.

"On the House" appears Sundays in The Inquirer. Contact Alan J. Heavens at 215-854-2472 or aheavens@phillynews.com.

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