Banks and thrifts place more emphasis today on being community banks than at any other time in recent memory. They are reaching deeper into their communities and attempting to be all things to all people, which is a tall order.

Years ago, there was a contest of sorts to trumpet their strength and importance by using grand labels like American, National, Union or Federal as identifying marks on their banking franchises.

Nowadays, the emphasis is directed locally to serve the entire community: We Know our Communities. Serving the Community since 1945. We're here to help you. We keep Community Hours, not Banking Hours. This greater level of community involvement was spurred to a large degree by the Community Reinvestment Act of 1977, which required banks to meet the credit needs of their entire service areas.

And yet few banks and thrifts really reach into all parts of their communities. One example: There is a general reticence to offer reverse mortgage plans to those it would benefit most - the aged population of America. In fact, there are fewer than 200 lending institutions in the country offering this product today. In downstate New York, with a population of some 14 million, only two banks have been found that actively promote them.

House Rich, Cash Poor

Reverse mortgages were fashioned for certain people 65 or older who wish to remain in and retain their homes, but have seen their savings virtually disappear as they struggle with rising property taxes, mounting fuel costs and maintenance, and large medical bills - all of which leads to mounting desperation. Their situation is best described as being "house rich and cash poor."

Reverse mortgages are keyed to the fully paid equity these aged Americans have in their homes. Purchasers of reverse mortgages use this equity to borrow for the future. Home equity borrowers, on the other hand, have to satisfy certain credit needs, show employment stability, and are generally limited to how much they can borrow against the growing equity in their home.

Many seem to dismiss the aged population as a small factor in the market. Not so. Recent statistics show that Americans age 65 and over make up 12.4% of the population, compared to 9.6% in 1974.

Many banks and thrifts say they do not offer reverse mortgages because they don't want to be in the position of removing older people from their homes, should that time come. But banks that fund reverse mortgages do not hold full title on the property. The aged borrower retains his or her ownership until the home is eventually sold - and only then is the loan and accrued interest paid off from the proceeds. Additionally, the borrower's heirs can elect to retain the property if they are willing to first pay off the loan.

Reverse mortgages are structured to make money for the bank with a significantly lower outlay of funds than they would typically provide to home mortgage borrowers. Built into the loan are origination fees, agreed-upon interest charges, monthly servicing fees, mortgage insurance premiums and closing costs.

Reverse mortgagees can obtain these funds on a monthly or quarterly basis, and also receive a credit line for bills and other expenses.

Reverse mortgages were generally unknown until the Federal Housing Administration (FHA) in 1987 established a Federal Mortgage Insurance Program to ensure home equity conversion mortgages. Under the plan, the maximum amount for borrowing ranges between $77,197 and $152,363. Several private insurance plans accommodate homeowners who have homes with appraised values ranging from $800,000 down to $133,333. The maximum equity selected cannot exceed 75%.

The size of the loan depends on age (one married partner has to be 65 or over), the appraised value of the home (it must be a debt-free, unattached single family dwelling) and the equity percentage selected. The loan is paid off when the owner or owners permanently vacate the home, sell the property or die.

Banks stressing their community involvement need to look at themselves a little closer and see just how far they reach out to their communities.

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