Appropriators Move to Cut HECM Proceeds

Senate and House appropriators are taking slightly different approaches in trying to cover an $800 million shortfall in the Federal Housing Administration reverse mortgage program. The Senate Appropriations Committee is providing $288 million to cover part of the shortfall, which is based on expected losses due to declining house prices, and requiring HUD to reduce the loan proceeds seniors receive by 5%. House appropriators are not providing any funds for the FHA Home Equity Conversion Mortgage program, but they are instructing the Department of Housing and Urban Development to cover the shortfall by reducing the proceeds on HECMs. Reverse mortgage lenders are opposed to such reductions, claiming it would hurt seniors who can't sell their home, but need a large enough HECM to pay off their existing mortgage. The National Reverse Mortgage Lenders Association is proposing that HUD reduce the upfront mortgage premium on HECMs and increase the annual premium to deal with shortfall. "We are willing to work with HUD to re-engineer the mortgage insurance premium," NRMLA president Peter Bell said.