Reverse Mortgage News

Squeezed older homeowners seek reverse mortgages to pay loans

June 4 , 2008

By Jim Wasserman, The Sacramento Bee

Pressured by a faltering economy and often burdened by loans they took out during the housing boom, more Sacramento-area homeowners are looking to reverse mortgages for an escape route. But many are finding the road blocked by the falling values of their homes.

"A lot of them aren't qualifying now. With the falling values they don't have as much equity," said Sylvia Williams, a Elk Grove loan specialist with San Rafael-based Sequoia Reverse Mortgage.

Reverse mortgages – in which the mortgage company makes monthly payments to the owner, rather than the other way around – have rapidly gained popularity in recent years as a tool for older homeowners to fund their living expenses. Meanwhile, mortgage lenders are also stepping up marketing efforts to older homeowners as the credit crunch has dried up a great deal of their traditional lending business.

Federal law requires nearly all users of reverse mortgages to be at least 62 years old.

But loan officials say that reverse mortgages, which were developed and marketed 20 years ago as a tool to fund vacations or expensive leisure activities, are increasingly serving something more simple – basic living expenses.

"We see more and more need lately," said Rich Young, executive vice president at Sacramento-based California Reverse Mortgage Co. Young said many older homeowners refinanced during the boom years, but often chose risky loans with lower payment plans that increased dramatically over time. Faced now with higher monthly payments, he said, many older homeowners are seeking a way to pay off their old loan.

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