Older Homeowners Can Tap Equity in Homes With Reverse Mortgages : Real estate: Move by Fannie Mae will greatly expand availability of such loans and help struggling retirees.

The nation’s largest provider of home loans on Thursday said it will begin offering mortgages that allow older Americans to tap the equity in their homes without having to move out.

The move by the Federal National Mortgage Assn., known as Fannie Mae, to offer so-called reverse mortgages beginning next year will greatly expand the availability of such loans, which are now available through a small number of lenders.

A reverse mortgage allows seniors to borrow against the value of their home and use the funds to supplement their income in either a lump some or monthly payments. The loan amount, which depends on the number of borrowers, their ages and the value of their property, is not repaid until the borrower dies, moves or sells the property.

The Fannie Mae loans will be available only through participating lenders, such as banks, thrifts and mortgage companies. Fannie Mae will buy these loans and then offer them as securities to investors.

Fannie Mae’s participation will be a major boost to senior homeowners struggling in retirement, said Lloyd Daniel, president of the Senior Loan Center in Sacramento, one of the few lenders that currently offers reverse mortgages. Last year, his firm financed eight reverse mortgages to homeowners in their 90s.

“There is a real need,” Daniel said. “You have no idea how many [senior homeowners] out there are struggling.”

Although a potential 3 million senior households may be eligible for Fannie Mae’s reverse mortgage, which is named the Home Keeper Mortgage, the agency expects to roll out the program slowly and make only 10,000 loans next year through affiliated lenders. A borrower could not be forced to sell or vacate the property to pay off the loan even if the total of mortgage payments plus interest exceeded the value of the home. Borrowers must be 62 and older.

“As the number of senior households nearly doubles by the 21st Century, the Home Keeper Mortgage will be available to over 80% of older Americans who own their home,” said Fannie Mae Vice Chairman Frank Raines.

“With staying in one’s own home a major goal for older homeowners, the Home Keeper Mortgage can provide crucial funds for a senior who may wish to remain financially independent,” he added.

Zan Beckstead, executive vice president of the California Mortgage Bankers Assn., said demand for reverse mortgages is not well-known because the loans are not widely available. However, given the intense competition among mortgage lenders for customers, Beckstead said there will probably be many lenders interested in selling the reverse mortgages.

Free brochures with more information are available by calling (800) 732-6643 between 9 a.m. and 5 p.m. Eastern time Monday through Friday.

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Associated Press contributed to this report.