Boom expected in volume of reverse mortgages

Real Estate Watch

October 21, 2001

The reverse mortgage industry expects a 50 percent boom in this year's loan volume compared with last year's, according to the National Reverse Mortgage Lenders Association.

The association projects 10,000 loans this year. Last year, the total was 6,650 loans.

Reverse mortgages, originated mostly by private lenders, are also known as home equity conversion mortgages.

With a reverse mortgage, a lender gives the homeowner, who is generally at least 62 years old, cash in a lump sum, sets up a monthly payout or creates a line of credit based on the home's appraised value, with fees and points subtracted.

For homeowners who are "equity-rich and cash-poor," reverse mortgages are a tool for keeping money flowing into a household.

Investment professionals, however, advise that reverse mortgages can also deplete a major asset.

A reverse mortgage is repaid when the owner dies, sells the home or moves from the home.

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