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Will Texas Embrace Reverse Mortgages?


Sente Mortgage and Scott Norman, VP Reverse Mortgage Division, were featured in the following article from

SAN ANTONIO, Texas (August, 2012) – Texas cannot quite catch up to the evolution of the reverse mortgage. When the first reverse mortgage was issued in Texas 12 years ago, the state had been the only one for about a decade without the financial product.

Texas now is the only state without the legal status to allow a new type of reverse mortgage, the kind used by seniors to buy a house, not just to draw down the equity in their existing house.

The delay in reverse mortgages in Texas stems historically from the homestead protections in the state’s constitution that made home-equity lending against the law until 1997. Reverse mortgages are a form of home-equity lending. It took additional constitutional amendments to match state law with national reverse-mortgage requirements for reverse mortgages and lines-of-credit loans.

Almost 50,000 reverse mortgages have been issued in Texas since 2000, making Texas the second-largest market for the product. But another constitutional amendment will be necessary to allow reverse mortgages for purchase.

With a reverse mortgage for purchase, seniors 62 and older would be able to use the equity in their existing houses to make a cash down payment on a smaller residence and then use a Federal Housing Administration-insured reverse mortgage for purchase to finance the new mortgage.

The seniors never would make another mortgage payment as long as they live in their house. The reverse-mortgage loan would be repaid when the house is sold. If the house sells for less than the loan amount, the lender would take the loss.

Here’s an example: A senior homeowner could sell a $100,000 house and use $40,000 of the sale to buy another $100,000 house. The senior then receives a $60,000 loan from a reverse mortgage lender to use for any purpose.

Reverse mortgages are not for everyone. Closing costs and interest rates are applied. But for seniors who are house-rich and income-poor, who have houses larger than they need and who seek smaller utility bills and yards, a reverse mortgage for purchase is worth investigating.

No proposal was introduced in the 2011 Texas legislative session because of the depressed state of housing nationally, said Scott Norman, a vice president in Sente Mortgage’s reverse-mortgage division. A resolution seeking a constitutional amendment making a technical correction to state law already has been drafted for the 2013 legislative session, Norman said.

“When you consider the increasingly strong need for senior housing in our state, we feel this product will deliver great relief for thousands of senior homeowners who are looking to better manage their retirement,” Norman said.

The spotlight for this issue will fall on San Antonio on Oct. 15-17 when the National Reverse Mortgage Lenders Association holds its national conference at the Hyatt Regency Hotel downtown.

The event, expected to draw more than 300 reverse-mortgage professionals nationally, also will incorporate the conference of the Texas Association of Reverse Mortgage Lenders.

Speeches, panel discussions, debates and workshops, all on retirement issues, will make up the national conference agenda, but a lingering issue among the professionals will be: Will Texas ever catch up to the rest of the nation on reverse-mortgages financial products?

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