A little known federal agency is taking steps to bring down the cost of government-insured reverse mortgages and perhaps convince more lenders to make them available to older homeowners who are house-rich but cash-poor.

Reverse mortgages allow homeowners aged 62 and over to convert the equity they have built up in their homes over the years into cash while living in the home for as long as they wish.

Borrowers continue to own their own homes, and do not need to make any monthly payments.  Instead, they can choose to receive the funds as a lump sum, line of credit, or monthly payment.  Hence, the name “reverse.”

The loan comes due only when the last borrower moves out, dies, or sells the home.

Currently, only two types of reverse mortgages are available in the market place, those that are sold by lenders to Fannie Mae and those that are insured by the Federal Housing Administration.

FHA’s Home Equity Conversion Mortgages or HECMs are the most popular.  And now, the Government National Mortgage Association is ready to turn pools of HECMs into securities for sale to investors worldwide.

Ginnie Mae security will foster a robust secondary market for reverse mortgages according to Robert Couch, Ginnie Mae’s president.

Home values have grown significantly over the years, and reverse mortgages are a good way for many seniors to stay in their homes, maintain ownership and access an additional stream of income to enhance their retirement.

Like Fannie Mae, Ginnie Mae provides an outlet for local lenders that do not want to hold loans in portfolio and helps them keep the cash flowing for more mortgages.  Fannie Mae is a publicly owned government-sponsored corporation that buys

Government and conventional loans while Ginnie Mae purchases only government-backed loans and is a corporation wholly owned by the Department of Housing and Urban Development.

The Ginnie Mae guaranty, which is backed by the full faith and credit of the United States, should allow mortgage lenders to obtain better pricing for their mortgage loans in the secondary market.  And the increased competition among lenders should result in expanded product offerings and reduces costs to borrowers.

The FHA endorsed a record 76,351 reverse mortgages for insurance in the fiscal year ending September 30.  That’s a 77% increase over the 43,131 loans endorsed in fiscal 2005.

More seniors are recognizing that traditional retirement tools, such as IRA’s, pensions, and 401(k) s are not providing sufficient income to help fund every day living expenses and healthcare.  Through proper education, more retirees are recognizing that the home they have lived in for so many years can now take care of them by using a reverse mortgage to access the equity accumulated over 20, 30, 40 years to help them live more comfortably.

The National Reverse Mortgage Lenders Association attributes the explosive growth to several factors, including high home appreciation rates in many parts of the country, which allow seniors to access greater amounts of equity.  Also, more lenders offering the product (NRMLA now represents about 500 firms nationwide compared to 370 last year at this time), and there has been a greater acceptance of reverse mortgages as a wealth management tool.  NRMLA anticipates reverse mortgages will be as commonplace as 401(k) s and other retirement planning tools.

Seniors are learning the advantages of reverse mortgages.  More than 20 million Americans over the age of 62 own their own homes.  Their equity was estimated at approximately $2.5 trillion in 2000.  The Mortgage Bankers Association has been lobbying to eliminate the statutory cap on HECMs and to increase the eligible loan size to the conforming loan limit.

If you or one of your friends or family members would like to find out more about reverse mortgages, call your Spring Hill realtor Karl Hosp at 352.650.6823 or email me at karlhosp@gmail.com.  I will be happy to put you in touch with a reverse mortgage specialist.