NHB bullish on reverse mortgage loans

With its new reverse mortgage loan-enabled annuity scheme(RMLeA)offering senior citizens assured lifetime payments instead of the earlier cap of 20 years,National Housing Bank(NHB) is expecting more takers for the product.It is in talks with banks and insurance companies to expand its pool of RML facilitators. While the concept of RMLeA itself has been a slow starter in India,NHB feels the new offering is more attractive to borrowers in terms of higher payments and better risk mitigation.NHB,which is the principal agency to promote housing finance institutions,launched the scheme in India in 2007. Reverse mortgage seeks to monetise the owner's equity in the house. This involves senior citizen borrowers mortgaging their house to a lender ,who then makes periodic payments to the borrower during the latter's lifetime. The borrower need not repay the principal and interest to the lender during their lifetime. On the borrower's death or on borrower leaving the house permanently,the loan along with accumulated interest is settled through sale of the house.The borrower's heir can also repay or pre-pay the loan with interest and release the mortgage without sale of property.Around 23 banks took up the RML scheme which include State Bank of India,Punjab National Bank, Bank of India and Indian Bank.According to NHB, as of March 31,2010,around 7000RMLs of Rs 1400 crore have been sanctioned. (BS 22052010)