FHA Reverse Mortgage Program on Chopping Block Again

If Congress fails to appropriate $250 million for the Federal Housing Administration reverse mortgage program, seniors could see the principal amount of a new loan reduced by 30%. "Without the budget request, we would be forced to reduce the amount of funds that would be available to seniors by more than 30%, which is, on average, a $23,000 to $27,000 impact," said FHA commissioner David Stevens. Last year, the Department of Housing and Urban Development requested $798 million in funding for the FHA home equity conversion mortgage program. When Congress rejected that request, HUD reduced the HECM principal limit by 10% for fiscal year 2010, which started October 1. During the first-half of FY 2010, FHA endorsed 45,200 HECMs, down nearly 22% from the same six-month period in FY 2009. The National Reverse Mortgage Lenders Association estimates that a significant portion of that reduction in loan volume is due to seniors coming up short at the closing table: the principal amount of the HECM is not enough to pay off the senior's existing mortgage. NRMLA president Peter Bell noted that funding is very tight with the appropriation process challenging this year. "We want to minimize any further principal limit reductions," he said. "Because every time we lower principal limits, we shut off access to the program for some seniors."