What is a Reverse Mortgage?


Seniors (you must be over age 62) can tap the home equity in their homes by obtaining a reverse mortgage in either a lump sum or multiple payments.  The homeowner is not obligated to repay the loan, and the payment is deferred until the homeowner dies, sells the home, or leaves the home by entering a nursing home.

It is available regardless of your current income.  The Housing Department has a website on frequently asked questions about reverse mortgages, found here.

The Problems for Banks


According to the New York Times, both Bank of America and Wells Fargo exited the reverse mortgage business because the loans have become so risky.  With the falling housing market, there is a greater chance there will not be sufficient equity to repay the loans.  Homeowners are still responsible for property taxes (as we know, this is a major percentage of Long Island homeowner budgets) and insurance.  Banks are not allowed to assess borrower’s ability to keep up with these payments.


What Does Met Life Know that These Major Banks Don’t?


Just as Bank of America and Wells Fargo exit the reverse mortgage business, MetLife has come on strong.  They’ve entered the reverses mortgage market as a hedge against declining interest rates.  According to Bloomberg, the loans are guaranteed by “by the Government National Mortgage Association, a U.S.-owned insurer of mortgage- backed securities commonly known as Ginnie Mae. The agency guarantees the loans that are issued by lenders like MetLife and subsequently sold to investors.”



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