The National Reverse Mortgage Lenders Association is planning to launch a print advertising and public relations campaign in October, in part to dispel what it says are misperceptions about its product.
"We want to make more people aware of the availability and benefits of reverse mortgages," said group president Peter Bell. "The idea of the campaign will be to dispel the incorrect notions and to educate people on the situations where the reverse mortgage would be a good option for a senior."
Reverse mortgages, home equity loans geared to the elderly, allow homeowners to convert their equity into cash. Repayment is generally due when the borrower dies or moves out.
Production of these loans has been flat for several years, Mr. Bell said, because of misperceptions and some apprehension on the part of lenders, who do not want to appear to be preying on seniors, and consumers.
This summer has brought much bad news for the reverse mortgage industry. Just before the July 4 recess, the Senate Appropriations Committee staff inadvertently deleted the line item for the Federal Housing Administration's general insurance fund from the VA/HUD appropriations bill, effectively halting FHA insurance for reverse mortgages and other types of loans. The Senate realized the mistake after the break and included the funding in a different appropriations bill in late July, but that bill did not pass.
And this week a Chicago mortgage broker was sued for allegedly defrauding senior citizens with promises of federally backed reverse mortgage loans for home repairs, which could fuel consumer fears.
On Thursday, Fannie Mae discontinued an equity share feature in its Homekeeper program, which allowed reverse mortgage borrowers to draw larger loans by pledging a percentage of the appreciation in their homes. Elizabeth Scholz, director of senior products marketing for Fannie, cited higher-than-expected prepayments and appreciation in home prices in some parts of the country.
"We were concerned that these loans, in some cases, could be more costly to seniors than we expected," she said.
The association is soliciting contributions for its consumer-education efforts from lenders and Fannie, Mr. Bell said. The campaign will run from October through December and help increase volume over the next year, he said. "The biggest hurdle is people not understanding."