In the ensuing years, interest grew in the concept of a ‘reverse mortgage’ loan which allowed the homeowner to defer payments until a later time -usually upon their death. Private lenders stepped into this niche market, however some of these loans relied upon ‘equity-sharing’ schemes in addition to accrued interest on the money borrowed.

Recognizing the increasing need for senior homeowners to preserve their retirement with home equity, Congress began exploring the concept of reverse mortgage loans. In 1969 the first hearing was held in the Senate Committee on Aging to discuss the government’s possible role in such a program. It wasn’t until nearly two decades later, in 1987, that the Home Equity Conversion Mortgage was formalized by Congress as part of an insurance bill.

Today, many still refer to the Home Equity Conversion Mortgage or HECM as a reverse mortgage loan. However, not all reverse mortgage loans are created equal. HECMs are federally-insured and have unique eligibility requirements and guarantees. Private reverse mortgage loans¹ offer access to one’s home equity with no required monthly payments as well, albeit with similar but different terms and conditions.*

The good news is that while only the HECM is insured by the Federal Housing Administration (FHA) and supervised by the Department of Housing and Urban Development (HUD), private reverse mortgage loans are closely monitored by regulators. It is recommended that homeowners thoroughly research their options on which loan may best suit their needs. Costs, features, eligibility rules, insurance, and interest rates should be considered.