Reverse mortgages can be a powerful financial tool in retirement — especially as more Americans age in place. But the product’s design today isn’t meeting many borrowers’ needs.
By design, reverse mortgages are meant to make retirement easier — and keep people in their homes.
Nelson Haynes, who worked at Deering Savings & Loan in Portland, Maine, is traditionally credited with creating the first reverse mortgage back in 1961. He wanted to help the widowed wife of his high school football coach stay in her home after her husband died.
In that era, “people observed that there were a lot of widows,” said Martin Neil Baily, a senior fellow in economic studies at Brookings and the former chairman of the Council of Economic Advisers under President Clinton.
“It was a time when a lot of men had pensions, and when the man died, the pension died as well. So these were women that didn’t have anything much to live on, but maybe they were living in a house that was quite valuable,” Baily said.