REVERSE MORTGAGES CAN HELP AILING SENIORS

By Tom Kelly
SpokesmanReview.com
July 16, 2006

Washington state's Long-Term Care Task Force is exploring new funding solutions to the escalating health care issue created by the growth of the state's senior population.

Barbara Stucki, a Bend, Ore., researcher and consultant, told the task force that one approach could be for the state to offer incentives to encourage greater use of reverse mortgages among impaired elders.

Reverse mortgage borrowers make no monthly payments on their mortgage during its term. The loan comes due when the borrower permanently moves out of his or her home. Programs vary, yet the more popular plans offer both an initial lump sum for immediate needs and a line of credit that borrowers can access at any time.

Seniors can "outlive" the value of their homes without being forced to move. The homeowner cannot be displaced and forced to sell the home to pay off the mortgage, even if the principal balance grows to exceed the value of the property. If the value of the house exceeds what is owed at the time of the homeowner's death, the rest goes to the estate.

To qualify, consumers must be at least 62 years of age and own their own home. The home does not have to be paid off entirely but the greater the equity, the greater the reverse loan amount.

Stucki, a former senior policy analyst for the American Council of Life Insurance and AARP employee, is the project manager and lead author of National Blueprint for Increasing the Use of Reverse Mortgages for Long-Term Care.

Incentives could be targeted to seniors who are at greater risk for needing Medicaid and could include:

• Paying for some or all of the up-front loan costs, and/or servicing fees.
• Bundling reverse mortgages with social services such as care assessment to help borrowers use their funds effectively for aging in place, that is, at home.
• Making it easier for reverse mortgage borrowers to participate in established community-based programs in Washington state.
• Providing back-end protection to impoverishment through a program modeled on an existing long-term care partnership program.

Stucki said incentives could be linked to the federally insured Home Equity Conversion Mortgage, which makes up approximately 90 percent of all reverse mortgages in the U.S. Or, incentives could be incorporated into a state-designed and -run reverse mortgage program for long-term care.
These efforts could help reduce the risk of institutionalization, complement Medicaid, and enhance quality of life for older adults in Washington, she said.

Minnesota is the only state now offering a reduction in fees if a reverse mortgage is used to implement a specific long-term care plan.
Washington Rep. Dawn Morrell (D-Puyallup), the task force's chairwoman, said the number of senior citizens in Washington will double over the next 20 years, which will create major challenges in funding high quality long-term care.

"We've been very fortunate that our state is a national leader in having high quality home care programs and healthy seniors, and this has helped to keep costs down," said Morrell. "But with the rapid growth in the number of senior citizens and people with disabilities, designing a future system involves challenges that we need to plan for now."

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