What the HECM is a Reverse Mortgage: The Importance of the Home Equity Conversion Mortgage in an Aging America
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WHAT THE HECM IS A REVERSE MORTGAGE: THE
IMPORTANCE OF THE HOME EQUITY CONVERSION
MORTGAGE IN AN AGING AMERICA
Ben Jakubowicz*
I. INTRODUCTION
American philosopher George Santayana once said, [t]hose who
cannot remember the past are condemned to repeat it.' Although less than
a decade has passed since the collapse of the mortgage industry resulted in
the worst recession in the United States in over seventy years, the
conditions are right for another perfect storm of mortgage-industry-related
problems; the rumblings of which are already being felt by the legislature
and in the courts. At the eye of the storm is a somewhat obscure lending
product known as the reverse mortgage and first in its wake are those
homeowners perhaps most susceptible to mortgage-related dangers-senior
citizens.
Once considered to be a loan of last resort, reverse mortgages are
now uniquely positioned to play an important role in the financial futures of
many baby boomers easing into their golden years.2 Reverse mortgages
provide an attractive lending solution for homeowners ages sixty-two and
older who are long on home equity but short on monthly cash flow. The
most popular type of reverse mortgage is the Home Equity Conversion
Mortgage (HECM), which accounts for 90% of the reverse mortgage
loans originated in the United States.3 Only reverse mortgages that are
insured by the Federal Housing Authority (FHA) are considered
HECMs.4 This Note focuses exclusively on HECMs and all references to
''reverse mortgages are specifically directed thereto.
Reverse mortgages differ from conventional mortgages in several ways
but most significant is that under a reverse mortgage, the lender makes
* J.D. Candidate, May 2016, Louis D. Brandeis School of Law, University of Louisville.
THE QUOTATIONS PAGE, http://www.quotationspage.com/quotes/George Santayana/21 (last
visited Feb. 16, 2015).
2 Rachel L. Sheedy, Reverse Mortgages: Risky for Boomers?, KIPLINGER'S RETIREMENT REPORT
(September 2012), http://www.kiplinger.com/article/retirement/T035-COOO-S001-reverse-mortgages-
risky-for-boomers.html.
3 Debra Pogrund Stark et. al., Complex Decision-Making and Cognitive Aging Call for Enhanced
Protection of Seniors Contemplating Reverse Mortgages, 46 ARIZ. ST. L.J. 299, 301 (2014).
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What the HECM is a Reverse Mortgage: The Importance of the Home Equity Conversion Mortgage in an Aging America
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