Reverse mortgage annuity options

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Editor's note: This is Part 3 of a six-part series. Read Part 1, Part 2, Part 4, Part 5 and Part 6. Some seniors who have most of their equity in their home want the security of a fixed lifetime annuity, and don't care about not leaving any equity behind for their heirs. A Home Equity Conversion Mortgage, or HECM, which is insured by the Federal Housing Administration, can fund the purchase of a lifetime annuity in two ways. One way is for the senior to exercise the "tenure" option under the HECM program, and receive a fixed annuity payment for as long as he remains in the house. The second way is for him to exercise the credit-line option under the HECM program, drawing the maximum amount permitted, and use it to purchase an immediate annuity from a life insurance company. I shopped both options in early December 2009 for a man, 86, with a house worth $400,000. This senior had a "Net Principal Limit" (NPL) under the HECM program of $288,000. That is the...