Since the days of the Republic of Texas, the Texas Constitution has prohibited the forced sale of homesteads with the exception of cases in which the mortgage, property taxes or home improvement loans went unpaid, or for property settlements in certain divorce and probate proceedings.
The voters of Texas finally approved reverse mortgage lending in 1999. Since then, more than 50,000 senior homeowners have obtained a reverse mortgage. Texas now ranks second in the United States in total reverse mortgages originated.
According to the Texas Department of Savings and Mortgage Lending, the state’s chief mortgage regulator, in the last six years their office has not issued a single enforcement action based on complaints involving reverse mortgages.
Today, the reverse mortgage industry is looking to amend the Texas Constitution to allow senior homeowners the ability to purchase a home with a reverse mortgage. Texas, already home to one of the most consumer-friendly reverse mortgages in the country, is also the only state in the nation that does not authorize such a financial transaction, which is known as the HECM for Purchase.
The HECM for Purchase is an FHA-insured loan that will afford many of the state’s senior homeowners the ability to enhance the quality of their lives with a new home purchase. If authorized by the Texas legislature and by voters, senior homeowners age 62 or older will be able to use a HECM for Purchase to downsize their existing home by using the proceeds to make a down payment on a smaller residence and to finance their new mortgage. Like a traditional reverse mortgage, there are no credit or income requirements and participants never make another mortgage payment as long as they continue to live in the home. (Of the 5.68 million owner-occupied housing units in Texas, 1,307,210 are owned by Texans age 65 and over, according to the U.S. Census Bureau.)
Simply looking at the state’s aging demographics shows that we must act now to help provide liquidity and safety to the burgeoning senior housing market. Already the second largest state in the country with a current population of 25.14 million, the state projects that Texas’ population by 2030 will add between 9 million to 18 million people, expanding to a total of 32 million to 41 million. When averaging those numbers, you see a projected population of 36.4 million people, an increase of 59 percent. That is the equivalent population of another Dallas, Fort Worth, Houston, San Antonio and Corpus Christi combined.
But Texas’ overall population, like the nation’s, is growing older. This aging is a result of the maturing of the baby boomer generation, which makes up the largest segment of our population. Baby boomers are exploding the size of the senior demographic and will continue to do so until 2020, when there will be more than 3.5 million seniors in Texas. As they retire, the baby boomers will put large demand on government programs for the state. In addition, boomers will drive housing demand toward move-up or second homes, as well as houses more popular with older adults or combined families.
What does the future hold for the housing industry as Texas’ population changes over the next quarter-century? One thing is certain: The ability to purchase appropriate senior housing with a reverse mortgage will be a boost to the real estate industry and to the senior homeowners who may be purchasing a new wave of senior-friendly homes. Residential real estate firms, homebuilders and title companies, for the foreseeable future, will undoubtedly be working with an increasingly mature population. The aging of the overall population will certainly impact the housing industry in Texas and significantly increase the demand for senior housing.
Now, with a new legislative session upon us, Texas, once again, has the opportunity to champion the cause of protecting senior homeowners. The prospects are positive and the options are real. When the time comes, I urge all Texans to vote for the HECM for Purchase. Perhaps soon, Texas seniors will have the same financial options as the rest of the country.