Texans to Vote on Reverse Mortgage Option Available in Rest of U.S.
Texas senior citizens, industry pushing for line-of-credit option
Sept. 22, 2005 - On September 28, mortgage lenders, brokers, and title companies will convene in Dallas for the fourth annual Reverse Mortgage Day in Texas, but the real focus will be on the upcoming election that will allow Texas senior homeowners the same opportunities enjoyed in every other state in the nation. On November 8, Texans can vote on Proposition 7 -- a constitutional amendment authorizing line-of-credit advances under a reverse mortgage.
Currently, the Texas constitution permits reverse mortgage advances to be made only in a lump sum or in monthly payments. In every other state a line- of-credit option is available.
"Many senior homeowners want to access their reverse mortgage only when money is needed to pay property taxes, medical bills, or for any of life's daily needs," said Scott Norman, president of the Texas Association of Reverse Mortgage Lenders in Austin. "The flexibility of a line of credit -- an option that is chosen by 88 percent of seniors in other states -- would allow homeowners to better conserve their estates by enabling them to control the timing of their borrowings and to significantly reduce borrowing costs."
Unanimously approved by the Texas Senate and the Texas House of Representatives this spring, Proposition 7 would effectively bring the reverse mortgage loan programs in line with the options offered seniors in all other states, while preserving the extensive consumer protections in the Texas Constitution.
Reverse mortgages allow homeowners 62 or older to borrow against the equity in their homes without having to sell them, give up title, or make monthly mortgage payments.
An appraisal of the house is the only credit requirement. As long as the borrower maintains the property and pays the insurance and taxes, the loan is not due until after the borrower leaves the house, both borrowers pass away and is typically repaid when the house is sold. Unlike a traditional mortgage that is paid back each month, a reverse mortgage makes payments to the homeowner. Payments are given in either a lump sum to cover unexpected expenses or as a regular supplement to monthly income. Payments can also be paid at intervals and amounts that are best for the homeowner.
"A reverse mortgage is one of the safest, most consumer-friendly forms of consumer credit and one of the most convenient way to access the equity in ones home," said Norman. "As an additional consumer protection, all borrowers regardless of credit situation, age or health, receive the same regulated interest rate."
Passage of Proposition 7 will allow an estimated $2 billion in home equity to be utilized by senior homeowners over the next two years to pay for the daily needs they may have, such as home healthcare and prescription drugs.
The maximum amount a homeowner can borrow for a reverse mortgage is based on the borrower's age, the property's value and the interest rate. A borrower cannot be forced to sell or vacate the property to pay off the loan, as long as the home is kept in good repair and taxes and insurance are paid on a timely basis. Borrowers also can choose to have the funds sent to their accounts through a wire transfer. All borrowers are required to attend an educational session on reverse mortgages and family members are encouraged to join them.
Source: Associated Press
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