I sat among more than 100 other residents of Summit, N.J., at a meeting of the Taxpayers Association. I am sure our conversation is being duplicated at thousands of meetings across the nation.

What brought us together was outrage about what was happening to our property taxes. And I kept thinking about reverse annuity mortgages.

Any community bank that doesn't offer them is missing an important opportunity.

Some homeowners in my town have seen their taxes double in one year. Under mandate of state law, Summit had its first reappraisal of property values in 12 years, and that forced some people to find thousands of dollars in a matter of weeks.

Most of those at the meeting were older people. Some said they'd lived in our town for 40 years or more. And a substantial minority indicated, on showing of hands, indicated that they might have to sell out and move elsewhere because they couldn't meet the new assessment.

You can't blame the town. State aid has been shrinking and municipal services costs are rising, so the money has to be generated out of real estate levies. And, with few exceptions, those at the meeting admitted that the revaluations were close to market prices of recent sales of homes.

But still, what do we do about people whose incomes are falling, but whose taxes are rising? In sum, a great many Americans have become "land rich and cash poor."

This is where the reverse annuity mortgage can play a major role.

Instead of having the borrower get a lump sum and pay it back in monthly installments, this type of lien turns the process around: Borrowers pledge their home, and then get a monthly check to help cover taxes and maintenance.

Then, after the homeowners die or leave voluntarily, the bank is paid a lump sum before the rest of the proceeds of the home sale are distributed to the family or heirs. Naturally, the younger the borrower, the lower the percentage of value you can get.

Procedures differ, with some banks using insurance to ascertain that there is enough equity to repay the loan if the residents happen to live a lot longer than the actuaries expected. Others rely on the actuarial tables to balance the experience, with those who stay longer than average subsidized by those who stay a shorter time.

Sure, the heirs are mad when the bank comes first as the home's proceeds are divided. But it sure beats having your parents thrown out of their home and into some less attractive living arrangement after years of being frugal, just because property values have soared.


The annual meeting is a wonderful opportunity that many bankers overlook.

First, it is a time to say something for the press and have a "hook" to hang it on.

If the bank has promoted special people, if it offers a new service, if it has something to brag about, this is the time to talk about it, for the press is there.

Second, if the bank brings in a good crowd of shareholders, through word of mouth it is an opportunity to let more people in the community know that they can buy stock in the bank. And, as all bankers know, the bank shareholder in the community is a much more loyal customer than the person who has no financial interest in the bank's being profitable.

How can you assure a large turnout that will give the community something to talk about?

Easy: Free lunch after the meeting for shareholders. It never fails.


Some banks find that when they make public-contact employees each call two people who came into the bank that day to thank them for their businesses, it is greatly appreciated.

Just as we hate cold calls by telemarketers, we apparently like warm calls that show appreciation.

Multiply your contact staff by 10 (two calls a day, five days a week), and it amounts to a lot of warm calls.

Mr. Nadler is a contributing editor of the American Banker and professor of finance at the Rutgers University Graduate School of Management.

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