Fannie Mae and other mortgage companies are trying to boost the appeal of reverse mortgages by linking them to other financial products.
Next month, Wendover Funding, a marketer of reverse mortgages, will team with Hartford Life Insurance Co. to let senior citizens buy annuities with loan proceeds. And Fannie Mae is considering ways for reverse mortgage recipients to get referrals to mutual fund companies and other financial services vendors.
The efforts are the most aggressive moves yet to broaden the appeal of reverse mortgages, which lenders are offering as a way to maintain loan growth as the population ages.
The loans were initially designed to help cash-strapped senior citizens stay in their homes by tapping the property's equity for cash. Borrowers get a lump sum or periodic payments, and the loan is repaid when they leave the home.
But the Wendover program lets seniors use the proceeds of the loan to buy an annuity, which would continue to pay out even if they moved. The arrangement would not come cheaply, though. A typical policy would require a senior citizen to commit more than $20,000 of the reverse mortgage proceeds to cover up-front annuity fees.
Wendover and Fannie Mae, a big buyer of reverse mortgages, say their efforts are meant to assist - not burden - consumers and that there is demand.
"We're at a point now where it seems the market is telling us what to do," said Robert Sahadi, Fannie Mae vice president for housing impact.
He said Fannie was following customer's wishes in July, when it tweaked the program to allow reverse mortgages to be used for new-home purchases. Now, it will broaden that program to include condominium purchases, Mr. Sahadi said.
And next year Fannie Mae may begin recommending certain financial services companies to seniors who want investment products or want to finance long-term care policies. Fannie would do this through "partnerships" with financial services vendors, Mr. Sahadi said. He declined to say what, if any, fees Fannie Mae would get from the vendors. He did say the arrangements would be made only with "quality" companies.
The prospect of adding features has some lenders scratching their heads because reverse mortgages are already very complicated. "It has to be something that can be easily communicated to the borrower," said Stanford L. Kurland, president of Countrywide Home Loans, Calabasas, Calif.
Mr. Sahadi said the new arrangement would be offered as an option, giving senior citizens the flexibility to spend reverse mortgage proceeds as they wish. "This way, they don't have to go out and pay extra fees" to financial intermediaries that arrange insurance and investment sales, he said.
The marketing developments come as Washington is looking closely at reverse mortgages, products that weren't being promoted aggressively until last year.
Last week the House passed a bill to help keep financial planners from charging exorbitant fees in connection with the products. The Senate in April passed a similar measure. The moves followed indications last spring that some companies were charging senior citizens thousands of dollars in unnecessary loan fees.