Reverse Mortgage History

The Evolution of Reverse Mortgages

Middle aged couple on bench

Reverse mortgage history dates back to the 1930's in Great Britain where it was known as home-equity reversion. From its earliest beginnings, it spread in the 1970's, to other parts of Europe where it proved to be a successful endeavor. The idea of using home equity to benefit those who had already paid off most or their entire mortgage, began to gain acceptance in the United States more than five decades ago.

The first known reverse mortgage recorded in early reverse mortgage history in the United States dates back to 1961. Nelson Haynes of Deering Savings and Loan created a financial tool designed to help a young woman stay in her home without the burden of paying a mortgage. He developed a loan that converted a portion of the equity in her home into cash, allowing her to maintain her current living status and use the money any way she chose. The idea for reverse mortgages came about a result of this innovative development.

It was more than sixteen years, in 1977, before another development was recorded in reverse mortgage history. Arlo Smith of Broadview Savings and Loan created a loan enabling borrowers to cash in on a portion of their home equity while deferring payments until it was sold. In 1979, another program in Wisconsin allowed borrowers to use some of their home equity in a similar manner.

The interim between the late 1970's and 1980's resulted in many positive changes in reverse mortgage history. The Connecticut Housing Finance Agency created a split-term product that allowed the customization of a reverse mortgage in the early 1980's. In 1987, the Housing and Community Development Act proposed that the federal government insure reverse mortgages. President Ronald Reagan signed it into law in 1988 again changing the face of reverse mortgage history. 1989 saw the issuance of the first federally insured reverse mortgage.

In 1996, the United States Department of Housing and Urban Development (HUD) asked the federal government to expand its program to include offering reverse mortgages to senior homeowners. In 1997, the National Reverse Mortgage Lenders Association was established to help counsel and educate both lenders and borrowers. Mandatory counseling programs are now a part of the reverse mortgage loan process. With new regulations, guidelines and safeguards now in place, reverse mortgages continue to enjoy success. Reverse mortgage history continues to evolve as new developments emerge.