Communicating the benefits of reverse mortgages to elder home owners and their children has proven to be a tough challenge. Indeed, there are still thousands, if not millions, of seniors who have never heard of mortgages that pay you, let alone know how they work.

But the best salespeople are those who have already tried a product and can tout its advantages and disadvantages. And according to research by the Department of Housing and Urban Development, the majority of folks who have obtained a federally-insured reverse mortgage are pleased with the concept and the way it has changed their lives for the better.

"Many participants were very enthusiastic about the impact (the program has) had on their lifestyles," according to the study. "They are no longer concerned about their financial well-being and are enjoying retirement."

A reverse mortgage is a loan that allows eligible senior home owners to covert the equity they've built up over the years into tax-free income without having to give up ownership or occupancy in the property. It's called a reverse loan because rather than you paying the lender, the lender pays you either in one lump sum or in monthly installments.

Loan amounts are based on the value of the property, your current age and your current life expectancy.

The loan is particularly appropriate for house-rich but cash-poor seniors who have their wealth tied up in their homes but are forced to subsist on fixed-incomes. But borrowers can use the funds any way they see fit to pay for home improvements or repairs, health care, prescriptions, travel. You name it, you can do it. It's your dough.

Better yet, the loan is not repayable until the borrower passes on, sells the house or permanently moves out. The loan is then repaid from the proceeds. But under no circumstances will the borrower owe more than the value of the property. And if there is any money left over, it goes to the owner or his heirs.

HUD's research was based on feedback from focus group discussions with some of the more than 38,000 elderly owners who have obtained a federally-insured home equity conversion mortgage over the last decade. The sessions were held in three cities Providence, R.I.; Seattle, and New Orleans.

More than three out of four participants said they were either "satisfied" or "very satisfied" with their loans. But just as important, the study noted the strong performance of the HECM program and the fact that closing costs have declined considerably:

Published: May 22, 2000

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When Lew Sichelman first started writing about housing in 1969, he was the youngest real estate writer in the country. Now, 37 years later, he's one of the oldest -- and most decorated. He has been rated the top housing columnist in the country by the National Association of Realtors as well as by his peers in the National Association of Real Estate Editors. Indeed, NAREE has recognized his work on numerous occasions. One year - due to his advancing age, he can't recall which one - he earned top honors in the annual NAREE Journalism Contest in three out of the four major writing categories. It was the first time one writer has won so many NAREE awards in a single year. Known for his ability to make even the most difficult topics understandable, Sichelman also has been honored by the National Association of Home Builders and the Mortgage Bankers Association. He began providing in-depth coverage of and consumer-oriented information about housing and housing finance at the Washington Daily News, where he was real estate editor. He held that same position for nine more years at the Washington Star, which purchased the News in 1972. The Star, a so-called "writer's newspaper" which also had the misfortune of being an evening paper, was put out of its misery in 1981, and Sichelman, who had begun self-syndicating his column in 1978, decided to become a full-time columnist. Today, his column, "The Housing Scene," is distributed by United Media to newspapers throughout the country. He also is on the staff of National Mortgage News, an independent newspaper which is considered the bible of the mortgage business. And he writes for numerous other publications, including MarketWatch.com, where he answers readers questions once a week, Sports Illustrated (don't ask), RealtyTimes.com, BigBuilder and others. Sichelman is married, the father of five and grandfather of eleven.