Reverse mortgage lenders may be forced to loan less money. House appropriators have instructed the Federal Housing Administration to cut the proceeds seniors receive when taking out a home equity conversion mortgage in fiscal year 2010 or Oct. 1 in 2010 according to National Mortgage News. This could spell disaster for some seniors.
In June, Housing and Urban Development Secretary Shaun Donovan told a Senate appropriations committee that he was open to raising premiums or restricting eligibility for reverse mortgages to avoid the $798 million taxpayer subsidy that was requested for the program.
“We do have options for changing the HECM program,” Donovan told a Senate appropriations committee in June, referring to the FHA’s Home Equity Conversion Mortgage.
The House Appropriations Committee approved the appropriations bill on July 17 instructs HUD to reduce the principal amount a senior can receive on a HECM.
Rep. Tom Latham, R-Iowa, told Newsday that he identified almost $800 million worth of budget savings by lowering subsidies in the housing program that guarantees reverse mortgages for older people. Latham proposed slightly lowering the amounts of the federally insured mortgages to eliminate the need for the subsidies. How much it would lover the principal limit is unknown.
Peter Bell, president of the National Reverse Mortgage Lenders Association, told National Mortgage News that the committee’s action “reduces what seniors will get, which is problematic at a time when there is great need.”
“We might find that some people that want a reverse mortgage won’t be able to get enough money to pay off their existing mortgage. They will be forced to sell the house and move.”
If you are considering a reverse mortgage, then you might want to do it sooner than later.
