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New Consumer Info Services
A new consumer education program on reverse mortgages has been
launched by AARP and the AARP Foundation, with support from the U. S. Department of
Housing and Urban Development (HUD). The new homeowner education program aims to improve
the quality and availability of consumer information and counseling on reverse mortgages
and related options. For complete information, click here. It includes:
- a new consumer guide,
- new online resources at www.aarp.org/revmort/
- reverse mortgage counseling by telephone.
Consumer Guide
AARP's new 68-page consumer guide, Home Made Money, covers the three basic types of
reverse mortgages, less costly alternatives to reverse mortgages, and key questions that
consumers should ask. It comes with an order form for free AARP publications on
alternatives to reverse mortgages, and detailed information on obtaining reverse mortgage
counseling. The consumer guide can be ordered online or downloaded from www.aarp.org/revmort/ - or by calling
800-209-8085.
Online Resources
The new online resources at www.aarp.org/revmort/ are an internet version of the consumer
guide. They feature an interactive calculator that provides individually customized
reverse mortgage loan estimates. Web visitors can order the consumer guide and request
reverse mortgage counseling online.
Reverse Mortgage Counseling
The counseling is provided by telephone at no cost to consumers through a network of
thirty counselors specializing in reverse mortgages. These "telecoun-selors" are
employed by nonprofit or public agencies approved by HUD, and were selected from among 400
counselors who took the first national exam on reverse mortgage counseling. The counselors
have been trained by the AARP Foundation, which will pay their employers for their work in
the telecounseling program.
The counseling is based on HUD regulations and a protocol developed by the AARP
Foundation. The counselors use loan comparison software that meets model specifications
developed by the AARP Foundation under a previous HUD grant.
Background
AARP and the AARP Foundation do not endorse any reverse mortgage product or lender. But
they have been national leaders in making these loans safer and more useful to homeowners.
AARP led the effort to develop federal insurance for reverse mortgages, and make lenders
disclose the true, total cost of these loans.
AARP and the AARP Foundation have strongly supported the availability of free,
independent counseling for homeowners interested in reverse mortgages and related options.
The federally-insured reverse mortgage program supported by AARP explicitly requires that
consumers must receive independent counseling that covers less costly alternatives to
reverse mortgages.
AARP's Role
in the
Reverse Mortgage Market
Background
During most of the 1980s, reverse mortgages were much too risky for
most home-owners. Many of these loans had to be paid back on a specific date, which
generally meant that borrowers would have to sell their homes and move at that time. But
most older homeowners strongly prefer to remain in their homes for as long as possible,
and do not want to risk having to move out before they are ready to do so.
On the other hand, the only reverse mortgages that let borrowers remain in their homes
indefinitely were potentially very costly. Typically, they required that borrowers agree
to give up a fixed percent of their home equity or future appreciation in the value of
their homes. This meant that the cost of these loans could be significantly greater than
most homeowners would be willing too pay.
Public Policy
Seeking a less risky alternative to these loans, AARP led the 8-year effort to
develop a federal program of reverse mortgage insurance. Launched in 1989, the Home Equity
Conversion Mortgage (HECM) insurance program permits borrowers to remain in their homes
for as long as they choose, and without having to pay a fixed percent of their homes'
equity or future appreciation. The HECM program charges a reverse mortgage insurance
premium on a non-profit basis, and defines the interest rates and loan fees that lenders
may charge. As a result, HECM loans provide the largest cash benefits at the lowest total
cost for the vast majority of reverse mortgage borrowers.
The HECM program also requires that consumers must receive independent counseling as a
condition of eligibility. By federal law, the counseling must provide information on
options other than reverse mortgages, including other housing, social service, health, and
financial options, deferred payment home repair loans, and property tax deferral programs.
The counseling is provided by federally- approved nonprofit and public sector counseling
agencies. These counselors must also discuss the financial impli-cations of reverse
mortgages, including the potential impact of these loans on a borrower's estate, heirs,
taxes, and public benefits.
In the early 1990s, AARP successfully advocated the adoption of a "total annual loan
cost" disclosure for HECM loans. A few years later, AARP convinced the Congress to
make this all-inclusive cost disclosure a requirement for all reverse mortgages through
amendments to federal Truth-in-Lending law. AARP has also supported expansion of the HECM
program's original eligibility criteria, reductions in insurance premiums for
refinancings, absolute limits on origination fees, and a single national loan limit based
on a borrower's age, home value, and prevailing interest rates.
Consumer Information & Counseling
Over the past decade, AARP members have demonstrated strong interest in reverse
mortgages, making them one of the Association's most frequently requested information
topics. In response, AARP has been the leading provider of consumer information and
education on reverse mortgages. Its products have included fact sheets, videotapes, and an
in-depth consumer guide.
Now in its seventh edition and completely rewritten for distribution in 2001, Home Made
Money is AARP's 68-page consumer guide. It covers the three basic types of reverse
mortgages, alternatives to these loans, and key questions for consumers to consider. An
internet version of the guide is also available on AARP's Webplace at
www.aarp.org/revmort/. The web version includes an interactive calculator that consumers
can use to estimate potential reverse mortgage loan advances based on their ages, home
values, ZIP codes, and current interest rates.
Since 1989, AARP and the AARP Foundation have trained all of the counselors in the
federally-insured Home Equity Conversion Mortgage (HECM) program under grants from the U.
S. Department of Housing and Urban Development (HUD). This training has been provided
on-site in over 40 states and via satellite TV broadcasts. It has also been packaged in a
series of videotapes and printed materials for self-study and small group instruction. In
2000, AARP/AARP Foundation coordinated the development and administration of a national
examination for reverse mortgage counselors. They also tested the feasibility of providing
HECM counseling by telephone in cooperation with six experienced HECM counselors.
During 2001, AARP and the AARP Foundation are testing a new tollfree consumer information
line on reverse mortgages and less costly options (1-800-209-8085). Funded by the U. S.
Department of Housing and Urban Development (HUD), this new resource provides information
on eligibility, estimates potential loan advances, and offers referrals to a network of 30
HECM "telecounselors" who are selected, trained, and coordinated by AARP and the
AARP Foundation.
Private Practices
AARP works with industry groups to raise the standards of consumer service in the
reverse mortgage market. It raises concerns about questionable products, practices, and
relationships with individual companies, associations, and government agencies. It has
also sponsored several national conferences, roundtable discussions, and ad hoc meetings
to involve industry, government, and consumer interests in jointly addressing
common concerns and market issues.
For example, AARP and the AARP Foundation recently engaged these interests in developing
the first national exam for HECM counselors, and in creating model specifications for
comparing reverse mortgages. Subsequently, AARP worked with major private companies to
design and test new loan comparison software that meets the model specifications. This
software is now being used by lenders and counselors to provide objective, side-by-side,
comparative loan information to consumers. 2/1/01
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Copyright © NCHEC. All rights reserved.
Revised: August 31, 2001.
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