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Seniors are often the target of legislation and it seems that they will once again be hurt by new legislation before Congress concerning reverse mortgages. The Appropriations Act 2010 requires that new policies will be set concerning HUD’s Home Equity Conversion Mortgage (HECM), or reverse mortgages.
The Reverse Mortgage Problem
As the money was being decided upon in Congress, it became evident that the economy had hurt the HECM program. A limping economy meant that there would be a shortfall and the program would need to be subsidized for the first time - to the amount of $798 million.
Both the House and the Senate have already passed their own version of the proposed legislation. A committee will soon be established that will seek to unite the elements of the Bills into one.
The House’s Plan for Reverse Mortgages
The House has decided against subsidizing HUD’s under funded program. Instead, it will seek to reduce the deficit by cutting down on the principal limits by about 10%. This amount will be used to subsidize it instead.
Another issue that will be up for grabs during the committee meeting is the lending limit for next year. At present, it is set at $625,500 and the House proposes that the same limit remain in place through the end of next year. This was raised during the financial crisis of last year so that seniors who had suffered some financial loss could have a way out of their larger home and bigger bills. The amount was raised to enable many to get a new reverse mortgage and pay off the balance, and then buy a smaller home where the bills and home would be easier to maintain.
The Senate’s Plan for Reverse Mortgage Loans
The Senate was a little more generous than was the House. It wants to help subsidize the HECM program with $288 million. Then, it will require HUD to reduce its principal limit by 5% to meet the rest of the projected needs. In addition, however, there will also be an additional charge of 2.66% on new reverse mortgages to create a surplus over the expected $30 billion that will come in.
Besides the overall reduction, the Senate also proposes that the lending limit be reduced to the pre-crisis figure of $417,000. If approved, this will occur on January 1, 2010.
Seniors Will Be Hurt Either Way
Both versions of Appropriations Act 2010 will soon be before Congressional committees who will have to find a way to merge them after some agreements are made. Obviously, there will be a winner and a loser. The real loser, however, is going to be the senior.
With an already small income, seniors will now have to face a reverse mortgage that will be 10% less principal than in previous years. In addition, about the only way that reverse mortgage rates can go is up, which means even less - particularly on an adjustable rate mortgage.
A thirteen-year veteran of the mortgage industry, Robert Griffin specializes in reverse mortgages and has helped over 3000 Americans find financial security with a reverse mortgage. The owner of Griffin Financial Mortgage LLC, based in Fort Worth, Texas, his memberships include the National Association of Mortgage Brokers (NAMB), the Mortgage Bankers Association (MBA), the National Reverse Mortgage Lenders Association (NMRLA) and the Better Business Bureau (BBB). Robert Griffin is also co-author of “62 Senior Moments.” If you would like more information, please call (866) 683-3690 or complete our online Reverse Mortgage Information.
Tags: Reverse Mortgage
