HUD Archives: News Releases

HUD No. 00-96
Further Information: For Release
In the Washington, DC area: 202/708-0685 Friday
Or contact your local HUD office May 5, 2000


View the No Place Like Home Report

BALTIMORE - Housing and Urban Development Secretary Andrew Cuomo today reported to Congress that reverse mortgages have become increasingly popular among cash-poor but equity-rich senior citizens, with the number of reverse mortgages more than quadrupling since they first became available in the early 1990s.

HUD's analysis of 38,000 reverse mortgages through 1999 found that only 388 of the loans ended in claims against HUD's insurance fund. Premium collections are expected to exceed claims by more than $500 per reverse mortgage, allowing HUD to build a substantial reserve against any future claims.

Focus groups in Providence, Seattle and New Orleans found that 78 percent of those using HUD reverse mortgages were either "very satisfied" or "satisfied" with the program.

Cuomo released copies of the report - called No Place Like Home - at a HUD conference on elderly housing needs. The conference - called Keeping the American Dream: Meeting the Challenges of the Golden Years - was held at Baltimore's Convention Center. U.S. Senators Paul Sarbanes and Barbara Mikulski, along with Baltimore Mayor Martin O'Malley, also addressed the conference.

Sarbanes announced today that he will introduce legislation in the Senate that will build on HUD's Housing Security Plan for Older Americans, which the Clinton Administration introduced last year. In his remarks, Cuomo called particular attention to an element of that plan - a joint HUD-Health and Human Services initiative that would help more than 1,500 low-income, elderly Americans receive long-term access to assisted living facilities.

"One's golden years are not nearly so golden if you can't afford to repair the roof of the home you own or find an apartment or assisted living to meet your needs," Cuomo said. " Last year, Congress took some major steps in helping us to address the housing needs of our oldest citizens. But as HUD's report, Senator Sarbanes' legislation and our HUD-HHS initiative demonstrate, there is much more that can and should be done."

"As our elderly population increases, it is critically important that we provide the opportunities and the resources to enable them to continue to live their lives with dignity," said Sarbanes. "This should include safe, decent and affordable housing, both for seniors who are living independently and for those who need assistance performing daily tasks. The legislation I am introducing will expand our federal commitment to help accommodate the needs of those in their golden years."

"Providing safe and affordable housing for America's seniors has always been one of my top priorities," said Mikulski. "This goal is especially important considering by the year 2030, our nation's elderly population will more than double. As the Senior Democrat on the Senate subcommittee that funds HUD, I fight each year to make sure programs like these are fully funded and able to adapt to the changing needs of this growing population."

"We owe our parents and grandparents for everything we have," O'Malley said. "The programs, issues and services that have been discussed during this conference represent the means by which we try to repay our parents, and ensure that as the elderly pass on the American Dream to their children, they aren't stripped of that dream themselves."

Reverse mortgages provide elderly homeowners a financial vehicle to tap the equity in their homes without having to sell or move from their homes. The reverse mortgages are available to all homeowners at least 62 years old who have low outstanding mortgage balances or own their homes free and clear. The borrower must occupy the property - which may be a single-family home, multi-family dwelling, a manufactured home or an Federal Housing Administration-approved condominium - and the property must meet minimum FHA property standards.

HUD's report to the Congress, prepared by Abt Associates Inc., concluded that the use of HUD-insured reverse mortgages could be increased if overall loan costs continue to decline, FHA loan limits are raised and the public's awareness of the reverse mortgage program was increased.

The HUD report also found that:

  • The median age of those using HUD reverse mortgages tends to be older (75) than the average elderly American homeowner (72).
  • Homeowners getting reverse mortgages are more likely to be single female households (56.3 percent) than the average elderly American homeowners (27.6 percent).
  • Homeowners getting reverse mortgages are slightly more likely to be African American (9.2 percent) than the average elderly American homeowner (7.8 percent).
  • The homes of reverse mortgage holders are more valuable ($107,000) than the homes of the average elderly American homeowner ($87,000).
  • The properties with reverse mortgages are older (41 years) than the average elderly American homeowner's home (38 years). However, the average cost of needed repairs is lower - $666 compared with $836 - as is the square-footage of the homes - 1,327 square feet compared with 1,700 square feet.
  • Among homeowners with outstanding balances or liens, those with reverse mortgages have a higher equity share (85.7 percent) than average American elderly homeowners (69 percent).
  • HUD's reverse mortgages seem to be used more in the West and Northeast regions of the country, with the greatest market penetration in the states of Utah, Colorado and Rhode Island and the District of Columbia.
  • Reverse mortgages are increasingly popular, with the share of all reverse mortgages in central cities rising from 35.2 percent in 1995 to 41.3 percent in 1999.

Assisted living programs offer an alternative to nursing homes and other institutional forms of care for the elderly. These facilities vary widely in size and type, but they generally provide daily meals, personal and other supportive services, healthcare and 24-hour oversight to residents.

Unfortunately, many of the low-income elderly cannot afford to live in such facilities and are left living in housing that does not offer their service needs. The median price for assisted living is presently more than $1,800 per month. Last year Congress passed significant elements of HUD's Housing Security Plan, which now allows for the conversion of some HUD-subsidized elderly housing to assisted living and makes assisted living an eligible use for Section 8 vouchers.

The HUD/HHS initiative is the next step in implementing the Plan and is part of HUD's FY 2001 budget request. It would further expand access to assisted living for lower-income elderly by spurring the construction of new affordable assisted living facilities. The FY 2001 budget requests $50 million to help build more than 7,500 assisted-living units, 1,500 of which would be for low-income elderly Americans.

Pre-loan counseling is mandatory for all reverse mortgage borrowers. Other borrower protections include a prohibition against forcing borrowers to sell their homes to pay off the mortgage, a limitation of borrower liability to the value of the home, and protection for the borrower in the event the lender fails to make the expected payments.

Under the reverse program, homeowners borrow against the equity in their home, receiving regular monthly payments or advances from a line of credit from the lender. As the homeowner receives payments and interest is accrued, the amount of debt secured by the reverse mortgage rises over time.

When the owner sells the house, moves out, or dies, the lender is repaid with interest out of the proceeds from the sale of the house. FHA insures reverse mortgages originated by FHA-approved lenders to protect lenders against loss if amounts withdrawn exceed the equity in the property at the time of sale.

Reverse mortgages were first permitted under 1987 amendments to the National Housing Act. Initially, HUD was permitted to insure 2,500 reverse mortgages through 1991 in a demonstration program. On a number of occasions, Congress has authorized HUD to increase the number of reverse mortgages it insured. Presently, HUD is permitted to have no more than 150,000 outstanding reverse mortgage loans.


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