According to the most recent U.S. Census, an estimated 285,000—or roughly 10 percent—of Chicagoland's population is over the age of 65. Older Chicagoans live in all parts of the city, both integrated into their longtime neighborhoods and in seniors-only condo developments all along the lakefront. While not as common as in other parts of the country, a significant portion of these residents have reverse mortgages.
In short, a reverse mortgage is a type of loan structure available only to senior homeowners 62 years and older. According to the federal Department of Housing and Urban Development (HUD) which administers the great majority of the reverse mortgages written in the U.S., it is a special type of home loan that lets the borrower convert a portion of the equity in their home into cash. Although the interest keeps building up, the reverse mortgage doesn’t become due or payable until the borrower either passes away or moves out of the home permanently, meaning that he or she hasn’t lived in the home for a year or more, according to Peter Bell, president and CEO of the National Reverse Mortgage Lenders Association (NRMLA). The repayment amount can’t exceed the sales value of the home, and after the loan is repaid, any remaining equity is distributed to the borrower or the borrower’s heirs or estate.
“There are liabilities taken on by lenders as part of their responsibilities as FHA lenders,” says Bell, but “the FHA insurance is designed to help mitigate those liabilities.”
After years of popularity, however, the current financial situation has seemingly made some lenders think twice about offering reverse mortgages.
Some of the largest lenders, such as Bank of America, Wells Fargo and Financial Freedom, have stopped offering the product, although they continue to honor existing reverse mortgages. Still, there are still some large companies offering reverse mortgages, such as Metropolitan Life.