The nation's second-largest pension fund may soon begin offering revere mortgages to its members.
A top expert on the mortgages said their adoption by the California Public Employees' Retirement System, known as Calpers, would accelerate the acceptance of the mortgages because of its reputation as a careful researcher of new products.
With its large pool of retirees, Calpers also would seem to have a rich source of potential borrowers.
Reverse mortgages provide money to borrowers, often in monthly installments, by drawing on the equity in their property. No monthly payments are made by the borrower, and the loan is paid off with the sale of the property.
Reverse mortgages particularly appeal to older borrowers who have lived in their homes for many years, building up large reservoirs of equity, and who also need additional retirement income.
Calpers has been looking into reverse mortgages for more than a year. Craig W. Hartung, chief of Calpers' information and program-development division, said the reverse mortgages program was in the "study and research stage." He said a decision would be made this year.
Reverse mortgages have grown in popularity recently. According to the National Center for Home Equity Conversion, a not-for-profit research organization, 10,000 reverse mortgages were originated last year. That matches the total number of all reverse mortgages originated before 1994. Reverse mortgage volume has doubled every year for the past four to five years, according to the group.
But if Calpers should adopt the product, whether as an investment tool or a member benefit, the results could be dramatic, said Ken Scholen, director of the National Center. That's because Calpers is something of a trendsetter since it does such an in-depth research job before it adopts a new program, lenders say.
Reverse mortgages can be originated in every state, except Texas, which does not allow for home-equity lending.
Calpers has more than 900,000 members and has assets of some $80 billion.
Mr. Hartung, at Calpers, said the pension fund had talked to about a half dozen companies that deal with reverse mortgages. Freedom Home Equity Partners, Irvine, Calif., and Transamerica HomeFirst Inc., San Francisco, were among those companies that made presentations to Calpers officials.
Fannie Mae is also developing a second reverse mortgage for introduction around midyear, according to reports.
