Reverse mortgage losses hit FHA
HUD to revise premiums, limit draws to bolster agency.
Concerned about financial losses in a federally insured mortgage program for seniors, the Department of Housing and Urban Development plans to adjust premiums and limit financial draws for elderly homeowners taking such loans.
HUD officials said the economic value of the federal reverse-mortgage program, estimated at negative $7.7 billion last year, is putting at risk the Federal Housing Administration’s entire insurance fund that supports all single-family loan programs, including traditional mortgages.
The federal reverse-mortgage program, officially called a home equity conversion mortgage (HECM), has been marked by problems, including a rise in foreclosures. HUD officials said Tuesday that if quick fixes aren’t made, the program will require an appropriation from Congress to ensure that the entire insurance fund maintains required reserves.
Home prices and interest rates, among other things, have made the reverse-mortgage program volatile, HUD officials said.
“Fairness dictates that future HECM loans do not adversely impact the overall health of FHA’s insurance fund, which supports the financing needs of younger, mostly first-time homeowners with traditional FHA mortgages,’’ HUD Secretary Ben Carson said in a statement. “We’re taking needed and prudent steps to put the HECM