LAGUNA NIGUEL, CALIF. BFB — LAGUNA NIGUEL, Calif. -- In 68 years of marriage, Clara and Frank Marino have faced plenty of tough times together.
But nothing, not the Depression nor the eight or so recessions that have come after it, caused the kind of financial panic the couple felt in 1990. That's when the economic factors that squeeze so many older Americans seemed about to push the Marinos out of their home.
"We had a fixed income," Mrs. Marino said. "And we had inflation."
The Marinos, ages 88 and 89, had been retired for more than 20 years. Their savings were depleted. And their combined income from Social Security was no longer enough to meet their monthly bills, which were growing because of Mr. Marino's medical problems.
So the Marinos took out a reverse mortgage -- a type of loan that allows homeowners age 62 and older to collect monthly income based on their home equity.
As a result of their decision, the Marinos have been able to stay in their home. And though Mrs. Marino says the couple is far from wealthy, they "can breathe a little" at the end of the month.
"So far, it's been wonderful. We're able to live and not worry all the time," she said.
In the past two years, reverse mortgages, once considered nothing more than a quirky and sometimes shady financial tool, have become a hot ticket in the home-finance business. Today, about 160,000 people have reverse mortgages, nearly double the number in 1990, according to the American Association of Retired Persons.
L The number of lenders offering reverse mortgages also is up.
"Reverse mortgages are our department's whole business right now. We're becoming experts in it, and it's our plan to continue doing so," said Debbie Ries, an office supervisor with Director's Mortgage, a Riverside, Calif.-based loan company that recently has expanded into the reverse-mortgage business.
Reverse mortgages have been relatively obscure, in part because they've had an image problem.
"Everybody told us it was a bad idea to get [a reverse mortgage]," Mrs. Marino said. "But we studied it, and we said 'Thank you, but we'll do it anyway.' "
The concern may stem from problems associated with one of the three basic types of reverse mortgage.
Two of the three basic varieties of reverse mortgages have caused few if any economic calamities.
One type, called a tenure mortgage, pays borrowers a check every month until they move or die. The Marinos have a tenure mortgage.
Another type gives the borrower a line of credit, which can be tapped at any time during a set number of years.
But the third type of reverse mortgage, called a term mortgage, has gained an unsavory image. The term loan gives the borrower money in either a lump-sum or regular monthly payments over a specific period of time, usually five or 10 years. When that term is over, the borrower must pay back the money, plus interest, usually by selling the house.
Such terms have caused financial and emotional hardship for some older borrowers who have taken out a loan while healthy and still gaining some income from savings, but who have run into financial trouble through ill health or lack of funds at the time the loan payment is due.
The process is no picnic for honest lenders, either.
"From a public relations standpoint and, frankly, from any standpoint, foreclosing on a 76-year-old widow is not a very good thing," said William Texido, president of Providential Corp., a San Francisco-based mortgage company.
"If reverse mortgages have had an image problem, it's because too many people issued term mortgages," Mr. Texido added.
But reverse mortgages' image problem might have ended in 1990. At that time, the Department of Housing and Urban Development agreed to extend a program to provide government-insured reverse mortgages until at least 1995.
Mr. Texido and others say the government backing has helped boost the image of reverse mortgages among borrowers.
In the past 18 months, short-term interest rates -- the rates that many older people depend on to maintain their savings income -- have fallen by about 50 percent. As a result, people have been forced to consider reverse mortgages as a way to maintain income.