HUD: More Money Needed to Prevent HECM Cuts

The Department of Housing and Urban Development is urging Congress to appropriate $250 million to the Federal Housing Administration for its reverse mortgage program to prevent further cuts in the cash seniors receive from a Home Equity Conversion Mortgage. Congress rejected HUD's request for a $100 million appropriation last year and FHA cut HECM loan proceeds by 10%. This year HUD is proposing to increase the annual insurance premium to 1.25% from 0.5% and cut the loan proceeds by 1% to 5%. Without a $250 million increase, FHA commissioner David Stevens told appropriators loan proceeds would be reduced $23,000 to $27,000 on average. This cut would result in a "serious decline" in loan volume "as HECMs would no longer be viable to many seniors who need to access their home equity while staying in their homes," Stevens testified.