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Pennsylvania Departments of Banking, Aging
announce new policy on Reverse Mortgages to
help protect Older Homeowners
HARRISBURG, Pa., July 20 , 2010 /PRNewswire-USNewswire/ --
Secretary of Banking Steve Kaplan and
Secretary of Aging John Michael Hall today
announced that a new policy for the reverse
mortgage industry defines proper conduct of
mortgage lenders and helps to protect
Pennsylvania's older homeowners.
Under the policy, homeowners age 62 and older who choose to
acquire a reverse mortgage will deal with
lenders who understand the complexity of
reverse mortgages, adhere to a code of
conduct and have the ability to support the
"Because reverse mortgage products are specifically
designed for -- and marketed to - older
residents, we feel a particular
responsibility to safeguard their interests
by making sure that they are not unfairly
taken advantage of," said Kaplan.
"Our policy is designed to make these products, which can
be useful to some, available under the right
A reverse mortgage is a way to borrow money by using a home
as collateral. It differs from a traditional
mortgage in that the home owner need not
fear the possibility that their home will be
lost in foreclosure during their lifetime.
However, the price one must pay to achieve
this security is often very steep compared
to other, more traditional kinds of
Unlike a traditional home equity loan in which the
homeowner makes monthly payments to a
lender, a reverse mortgage provides the
homeowner with monthly payments, a lump sum,
a line of credit or a combination of these
payments. A reverse mortgage allows older
homeowners to withdraw equity from their
homes; the money does not have to be paid
back until the borrower dies, sells the home
or moves out.
The most popular reverse mortgage type is the Federal
Housing Administration Home Equity
Conversion Mortgage, or HECM.
The HECM loan limits some of the fees that can be charged
and requires borrowers to receive counseling
from an independent, certified agency.
Homeowners may also choose a private,
proprietary reverse mortgage which does not
carry the same eligibility guidelines, fee
limits and counseling requirements.
"While not appropriate in every situation, reverse
mortgages can be an option for some older
homeowners who want to keep their homes, age
in place and protect their hard-earned
resources," said Hall.
"However, some types of loans carry increased risk to the
borrower. I applaud the Department of
Banking for developing safeguards to protect
borrowers against bad advice and outright
fraud by some lenders."
Reverse mortgage counseling is available in-person or by
telephone. Homeowners can seek counseling
from an agency approved by the U.S.
Department of Housing and Urban Renewal,
online at www.hud.gov, or the Pennsylvania
Housing Finance Agency, online at
The new reverse mortgage statement of policy was published
in the Pennsylvania Bulletin on July 10 and
can be viewed at:
The Department of Banking has issued a consumer information
brochure available online at
in the "Pamphlets" tab under consumer