HECM for Purchase: Waiting on Texas
Scott Norman, VP Reverse Mortgage Division wrote the following article for The Reverse Review.
www.reversereview.com (March 17, 2010) – Since the days of the Republic of Texas, the Texas Constitution prohibited the forced sale of homesteads except for nonpayment of the mortgage, property taxes, home improvement loans or for property settlements in certain divorce and probate proceedings.
After 154 years, the voters of Texas finally approved reverse mortgage lending in 1999. Since then, over 32,000 senior homeowners have obtained a reverse mortgage. After ten short years, Texas now ranks third in the United States in total reverse mortgages originated.
According to the Texas Department of Savings and Mortgage Lending, in the last 12 months, the Commissioner has not issued any disciplinary action based on complaints against a reverse mortgage broker or banker.
Today, the reverse mortgage industry is looking to amend the Texas Constitution to allow senior homeowners the ability to purchase a home with a reverse mortgage. Texas, already the home to the most consumer-friendly reverse mortgage in the country, is also the only state in the nation that does not authorize such a financial transaction, which is known as a Home Equity Conversion Mortgage (or HECM) for Purchase.
The HECM for Purchase is an FHA-insured loan that will allow many of the states senior homeowners the ability to maintain and enhance the quality of their lives with a new home purchase. If authorized by the Texas Legislature and voters, senior homeowners, age 62 or older, will be able to use a HECM for Purchase to downsize their existing home, use the equity to make a cash down payment on a smaller residence, and then allow the “HECM for Purchase” to finance their new mortgage. Like a traditional reverse mortgage, there are no credit or income requirements and participants never make another mortgage payment as long as they continue to live in the home. Note: Of the 5.46 million owner occupied homes in Texas, 1.38 million are owned by Texans age 62 and over.
Simply looking at the state’s aging demographics shows that we must act now to help provide liquidity and safety to the burgeoning senior housing market. Already the second most populous state in the country with a current population of 24.8 million, the state projects that Texas’ population by 2030 will add between nine million and eighteen million people, expanding to a total population between 32 million and 41 million. When averaging those numbers, you see a projected population of 36.4 million people, an increase of 59%. That is the equivalent population of another Dallas, Fort Worth, Houston, San Antonio, and Corpus Christi combined!
But Texas’ overall population, like the nation’s, is growing older. This aging is a result of the maturing of the Baby Boomer generation, which makes up the largest segment of our population. Baby boomers are ballooning the size of the senior demographic and will continue to do so until 2020 when there will be over 3.5 million seniors in our state. As they retire, the Baby Boomers will put large demand on government programs for the state. In addition, the Boomers will drive housing demand toward move-up or second homes, as well as houses more popular with older adults or combined families.
What does the future hold for the housing industry as Texas’ population changes over the next quarter century? One thing is certain; the ability to purchase appropriate senior housing with a reverse mortgage will be a boost to the real estate industry and to the senior homeowners who may be purchasing a new wave of senior-friendly homes.
Residential real estate firms and homebuilders, for the foreseeable future, will undoubtedly be working with an increasingly more mature population. The aging of the overall population will certainly impact the housing industry in Texas and significantly increase the demand for senior housing.
Now, with a new Legislative session almost upon us, Texas, once again, has the opportunity to champion the cause of protecting senior homeowners. The prospects are positive and the options are real. When the time comes, I urge all Texans to vote for HECM for Purchase.Perhaps soon, Texas seniors will have the same financial options as the rest of the country.
For detailed insight into reverse mortgages and how they are helping Texas seniors finance their retirement, see the white paper prepared by Scott Norman, VP Reverse Mortgage Division.
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