Chennai: Finance minister P Chidambaram''s announcement that National Housing Bank would launch reverse mortgage product will surely welcomed by the senior citizens. What the announcement might mean is that NHB might start refinancing the reverse mortgage loans of approved housing finance companies.

Perhaps www.domain-b.com was the first Indian journal to talk about reverse mortgage in 2004. (See: ) Last August Dewan Housing Finance Corporation Limited came out with its reverse mortgage product called Saksham. It was the country''s first reverse mortgage product. (See: ) Says Kapil Wadhawan, vice chairman and managing director, Dewan Housing, "It was a soft launch to understand the market for the product and also the concerns of the senior citizens. We will soon launch our product in a major way."

According to housing finance industry people NHB had not drawn a programme for refinancing of reverse mortgage portfolio of housing finance companies. The finance minister''s announcement is expected to correct this issue.

So what is this reverse mortgage? As the name suggests, a reverse mortgage is the exact opposite of a normal mortgage transaction but restricted to a housing property.

A normal mortgage transaction involves the home being pledged by the buyer to the lender as a security for the loan. In a normal mortgage transaction, banks and home finance companies have to consider the borrower''s income and repayment capacity to determine the loan amount, duration and the monthly repayment.

However, in a reverse mortgage the lender instead of paying upfront, pays the borrower a sum every month. Inteereastingly, the borrowers do not have to repay the money. The loan is settled on the death of the borrower and his spouse or when they cease to occupy the home as their principal residence.