The amount of reverse mortgages originated in Texas is growing, passing Florida for the second most nationwide but still behind California, where 13% of these loans are located.
A reverse or Home Equity Conversion Mortgage allows the borrower, who must be at least 62 years old, to convert a portion of the equity in the home for cash. No repayment is required until the borrower no longer uses the home as a principal residence or does not meet the obligations of the loan.
According to the Texas Mortgage Bankers Association , there are currently more than 72,000 reverse mortgages outstanding in the U.S. Texas holds more than 6,300 for an 8.2% market share.
"This is incredibly positive news for Texas families," TMBA President Scott Norman said. "As more seniors are forced to cope with rising cost of health care and home improvements, reverse mortgages will take on a greater significance."
But these loans are not without their risks. Former Florida Attorney General Bill McCollum warned senior citizens in 2008 about several scams that target them directly. Predatory lenders, he said, can often engage in deceptive practices and use high-pressure sales tactics to steer borrowers into "inappropriate loans."
He did say that reverse mortgages can serve a purpose when financed through the Department of Housing and Urban Development 's HECM programs.
Still, reverse mortgages are becoming more popular in Texas. In 1999, the Legislature amended the Texas constitution to authorize reverse mortgage lending. Since 2008, senior citizens in the state have borrowed more than $2 billion.
More could be coming. The real estate center at Texas A&M University estimates that by 2030, 5.18 million Texans will be over the age of 62, compared to 2.5 million in 2010.
"The overwhelming growth we’re seeing reinforces our belief that reverse mortgages remain a safe and viable option for Texas seniors as they evaluate their retirement plans," Norman said.
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