Proposition 7 - KLTV.com - Tyler, Longview, Jacksonville |ETX News

10/7/05

Proposition 7

Proposition 7 is on the ballot tomorrow, and would give seniors a new option when considering a reverse mortgage. The constitutional amendment would authorize a line-of-credit advance to seniors.

A reverse mortgage helped Mary Nelson keep her home. After thirty years, she was having trouble making the monthly payments. When the bank threatened to foreclose on her house, she thought about selling it. At one point, she even considered bankruptcy. Then one day she read about reverse mortgages in the paper.

"Well, I said, 'Maybe this is the answer that I'm looking for. I heard about it before, but I wanted to do something different. So I just called."

Mary and her daughter Fran were both a little skeptical at first.

Fran said, "She told me she had found that. And that she was thinking about doing it. And I said, 'Do you think it will work?' And she said, 'Well, we'll see."

Mary was just weeks away from losing her home when she and Fran decided to meet with a mortgage broker.

Brad Harvey handled her case.

"We were able to do a reverse mortgage that avoided the loss. She was pretty much at the end of the rope as far as how long was she going to be able to keep the house,"Harvey said.

Under the old rules governing reverse mortgages, seniors had two options. They could either establish a payment plan or take out one lump sum. That's what Mrs. Nelson did to keep her home. 

Under the new rule, seniors have the option of establishing a line-of-credit. This gives them the flexibility to only draw the amount of money they need out of their home.

Critics argue that reverse mortgages are complicated, expensive and risky. They also say they eat away at a person's estate.

Harvey takes issue with that criticism.

"Many people are looking at the ability to create a larger estate for their children, because of what you can do today with financial products. A single premium life policy today, that you dump forty thousand dollars in will create quite a bit more of an estate than what the house is worth."

Mary Nelson's reverse mortgage will not make her rich by any stretch of the imagination. There was barely enough equity in her house to pay off her debt. But the piece of mind she has is knowing no one can take her house. And that makes her feel like a million bucks. 

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