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Rachel D’Oro

(c) ANCHORAGE DAILY NEWS

 02/28/99

   Helen Hunt made do for years by carefully budgeting her monthly Social Security checks and Alaska longevity bonuses. But with a great-grandson to raise, she could barely pay her bills. Even the $373 mortgage payment on her South Anchorage home was a burden for the 79-year-old widow.

   "There was never any money left,'' Hunt said. ''I didn't know what to do.''

    Hunt was considering selling her two-story house last year when she read about reverse mortgages, an increasingly popular cash-raising tool for Americans 62 and older. Last fall, a reverse mortgage allowed Hunt to borrow against the house and tap into a $107,000 line of credit she can use whenever she wants.

   Best of all, Hunt doesn't have to repay the loan as long as she lives in the home she bought for $42,000 with her late husband, Dick, almost three decades ago. The debt is due only when she dies or moves from the Diggins Drive home, which is valued at $146,000.

   ''It just took the stress and strain of financial worries from me,'' said Hunt, relaxing recently in her cheerful sky blue house. ''I have the money now and can get it if I need it.''

    During the 1990s, reverse mortgages have boomed in Lower 48 but have been slow to gain attention in Alaska. Only 25 people, including Hunt, have taken out reverse mortgages so far in the state, according to local bankers. That number surely will grow, however, as word spreads about a state law enacted last year that allowed lenders in Alaska to offer the full range of federally endorsed programs, giving seniors a choice.

   ''It brought awareness to the public about what reverse mortgages are,'' said Amber Hutchens. She manages the mortgage loans servicing department at National Bank of Alaska, and helped push the bill through the Legislature as then president of the Alaska Mortgage Bankers Association. In Alaska, NBA and Norwest Mortgage Inc., offer reverse mortgages, according to Jan Jones of Consumer Credit Counseling Service of Alaska.

   Reverse mortgages work roughly the opposite of the way regular home mortgages work. In a regular mortgage, the borrower needs a certain income to qualify, and the borrower's monthly payments increase his or her equity in the house while shrinking the lender's equity.

   For reverse mortgages, the borrower's income is not an issue, only the amount of equity he or she has in the home. And instead of the borrower making payments to a lender, the lender pays the borrower. Each payment shrinks the borrower's equity in his or her home as the lender's ownership in the house grows.

   ''Reverse mortgages are a need product,'' Hutchens said. ''They bring financial relief, burden relief. If you never had a problem, why would you need one?''

   With Alaska's high cost of living and dwindling state payments to seniors, reverse mortgages could make life easier for many of the nearly 42,000 people 62 and older who live in the state. Prospective borrowers, however, should be aware of upfront costs, said Ken Scholen, director of the National Center for Home Equity Conversion, a private, nonprofit consumers group based in Apple Valley, Minn. Although homeowners have to pay interest and extras like monthly servicing fees, insurance premiums and closing costs, these fees can be financed along with the reverse mortgages, he said.

   ''People need to realize this is not free money,''       Scholen said. ''It's a real loan.''

   The benefit for cash-poor homeowners: Reverse mortgages let people cash in on their home equities and stay in their homes. About 50,000 Americans have reverse mortgages, most of them taken out in the 1990s,       Scholen said. The homeowner can choose from these options:

   * A line of credit.

   * Monthly payments for as long as the borrower lives in the house.

   * Regular payments for a specific period that ends before the borrower leaves the house.

   * A combination of line of credit and regular payments.

   If seniors opt to collect monthly payments and outlive the amount of the reverse mortgage, they continue to collect. The difference is paid by insurance built into the loan, said Jones, housing director at the Consumer Credit Counseling Service.

   ''It's a wonderful tool for some seniors and not so great for others,'' Jones said. For example, reverse mortgages aren't a good choice for seniors who want to leave their houses to their heirs, or seniors who give someone else control of their money, including the new money available under a reverse mortgage.

   ''We discourage someone who isn't completely in control of their faculties because they could easily be taken advantage of,'' Jones said. ''The danger is that somebody else could take all their funds.''

   A reverse mortgage was the answer for Hunt, who has raised her 14-year-old great-grandson, Billy Ross, since he was an infant.  Dick Hunt died of cancer 10 years ago at age 59, long before he was to retire as an oil drilling supervisor. His widow, who once owned the long-defunct Mom's Merrill Field Cafe, hadn't worked outside the home since the mid-70s. She had little money of her own.

   Hunt used most of her husband's $100,000 life insurance to pay off a second mortgage on the house and medical bills not covered by Dick's health insurance. To bring in more money, she sold two small trailer lots in her hometown of Roundup, Mont. During the last decade, Hunt rationed her monthly income from Social Security, state longevity bonuses, and shrinking dividends from Texas oil wells her husband had invested in years before. But money got tighter as Billy grew into a strapping 6-foot-3 teen. ''Big as a moose,'' is how Hunt describes him.

   Hunt was instantly intrigued when she heard about reverse mortgages last summer. She called NBA, which sent her to Consumer Credit Counseling.

   ''They explained it all to me and really set me on fire,'' Hunt said. ''But I was skeptical and dragged my feet. My kids were skeptical, too.''

   In November, she quit stalling and applied for a reverse mortgage. Around the same time a friend paid off the remaining $12,000 Hunt owed on her home. That allowed Hunt to borrow even more under her reverse mortgage.

   Hunt is now a firm believer. She plans to use her money to repaint the interior of the house, repair the deck, replace the garage door and travel with Billy to the Lower 48. When she dies, the house will pay off her loan.

   ''This is the way to do it,'' Hunt said. ''And you don't have to worry about your kids paying the bill because they won't have to.''

   Wanda Holmes, 80, got a reverse mortgage on her Fairview townhouse last month. Unlike Hunt, Holmes doesn't have a line of credit or even get a monthly cash payment. Instead, she used the reverse mortgage to pay off her original home loan, freeing herself from burdensome monthly mortgage payments.

   Free of the monthly $500 debt, the retired cook plans to cut back the baby-sitting she took on to help make ends meet. Now she can better enjoy her ''millions of friends'' and hobbies like polka dancing and baking bread.

   ''At 80, it's time to give up work a little bit,'' Holmes said. ''I've been working so hard all my life, and now I want to relax some.''

   Hunt and Holmes can thank Joe Ashby, a Sitka octogenarian, for enhancing their latter years. Ashby, 83, was the catalyst behind the new Alaska law.

   A late-life divorce settlement left Ashby deeply in debt. A few years ago, he started looking into ''equity-share'' reverse mortgages. The ''equity is shared'' because the lender takes possession of up to 10 percent of the home's equity when the reverse mortgage is made. These mortgages provide the largest monthly payments to borrowers.

   It sounded like a good deal to Ashby, who had owned his beachfront home since 1947. But equity-share mortgages weren't allowed in Alaska. Ashby started a phone and letter campaign to legislators and banking officials like NBA's Hutchens. Around the time equity share became available, however, Ashby bruised his heart when he dropped a heavy box on his chest. As a result of the accident, he had to get a pacemaker and no longer had the energy to pursue a reverse mortgage.

   Instead, he sold his home to a buyer who is in no hurry to move in. Ashby, who gets to stay as long as he wants, said he has no regrets about working so hard to create a program he will never use.

   ''I helped out a lot of Alaskans,'' he said. ''And I got a lot of pats on the head for it.''

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