Bill would lift reverse mortgage limits
By SARAH LARSON
The Intelligencer
Arthur Gerold lives in Solebury, but he’s not what you’d call rich.
He’s got no 401(k). No investments to speak of.
The only thing the 82-year-old costume designer and theater producer has is his house, which he said Monday is currently worth about $750,000.
“This is it. This is what I have, the only asset,” he said, gesturing over the tree-shaded stone patio toward the backyard swimming pool. “I love it here; I want to live here.”
Gerold and his late wife, Marilyn, built the house about 45 years ago for about $25,000, he said. Though he owns it free and clear, property taxes and upkeep take their toll on his monthly Social Security check.
Until, that is, he received his first monthly payment from a so-called reverse mortgage.
A reverse mortgage is a type of loan that allows older homeowners to convert equity in their home into cash. Loans are available to homeowners age 62 and older who either own the home outright or have a low remaining mortgage balance.
The loan amount typically depends on the borrower’s age and the value of the home. It does not have to be repaid until the home is no longer the owner’s primary residence: typically, when the owner dies or the house is sold.
Congressman Mike Fitzpatrick held a press conference on Monday at Gerold’s home to talk about a bill he introduced in Congress last week to make more reverse mortgages available for seniors.
Reverse mortgages began in 1989 with a small federal pilot program, said Peter Bell, president of the National Reverse Mortgage Lenders Association. Most reverse mortgages are insured by the Federal Housing Administration. The law that allowed the loans, however, also limited the number of reverse mortgages the federal government could insure at one time.
Today, that number is 150,000. The supplemental appropriations bill President Bush signed in May raised the cap to 250,000. But advocates say that is not enough.
“More and more people are finding out about reverse mortgages, and especially as the baby boomers age, they’re just going to keep becoming more popular,” said Wendy Whitaker, a reverse mortgage specialist with Mortgage Mobility in Richboro.
Introduced last week as the Reverse Mortgages to Help America’s Seniors Act, Fitzpatrick’s bill would abolish the limitation.
“This makes good sense on a whole bunch of different levels,” Fitzpatrick said.
The bill has eight co-sponsors so far and has been referred to a committee for further study.
The AARP has been wary of reverse mortgages, warning seniors the loans may have hidden costs and consequences and some lenders may see senior clients as attractive scam targets.
Fred Greisbach, state director of AARP, said that position has changed in recent years, thanks to improved safeguards.
“This is not a program that is for everybody, but it is a program that has matured,” Greisbach said. “From our perspective, between the government oversight and mandatory counseling, seniors go into this with their eyes open.”
Reverse mortgages have improved life for “house rich, cash poor” people such as Gerold and Liz Gardner, who celebrates her 78th birthday next week.
“There was money just sitting there, and I couldn’t get to it without leaving the place,” said Gardner, who took out a reverse mortgage on her New Hope townhouse. “But I don’t want to leave.”
Now, Gardner gets about $800 each month from the 10-year reverse mortgage on the home, which she said she bought 25 years ago for $79,200 and is worth about $350,000 today.
With it, she has put a new roof on her house, repainted the interior and paid for about $3,000 worth of dental work.
“It really has been a lifesaver,” Gardner said. “I think it’s a huge benefit for seniors.”
Sarah Larson can be reached at (215) 345-3187 or slarson@phillyBurbs.com.
