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In order to combat the slumping housing market the Obama Administration has sent a request to Congress for a 798 million dollar taxpayer subsidy for the Federal Housing Administration (FHA) and the U. S. Department of Housing and Urban Development (HUD) Home Equity Conversion Mortgage (HECM) program or reverse mortgage. This subsidy is the first ever of its kind.
Based on the White House report, the decline in house prices have adversely affected the projected credit performance of Home Equity Conversion Mortgages. As a result, the program has a positive subsidy rate. The Budget provides both fixed and variable appropriations of credit subsidy to support continuous operation of the program even if actual loan activity exceeds projections. The Budget projects insurance of $300 billion in single-family forward mortgages and $30 billion in Home Equity Conversion Mortgages with an additional $70 billion in commitment limitation available in case these amounts are exceeded during execution.
The budget set by the White House for 2010 states, the 2010 Budget continues to support the greatly expanded efforts of a reformed Federal Housing Administration (FHA) as it continues its modernization efforts. The Department continues to help stabilize our mortgage markets, and new legislation and economic conditions have made the FHA a major source of mortgage financing. The Budget includes $100 million for the Housing Counseling Assistance program, which is the only dedicated source of Federal funding for the full spectrum of housing counseling services.
The reverse mortgage loan was initiated in 1990 with the intent to allow mature Americans, 62 years and older, use the equity in their current permanent homes for supplemental income in either a lump sum, monthly payments, a line of credit or a combination of all three. Even though the reverse mortgage program does not base program participation on income or credit the overall housing market has impacted its future. Borrowers who are currently and want to participate in the reverse mortgage program will not be impacted by the subsidy request. The request to Congress is to support the current reverse mortgage program and to ensure mature borrowers are able to continue to receive the up to 60 percent of equity in their home for supplemental income.
Unlike a traditional equity mortgage, the reverse mortgage program pays mature borrowers rather than the borrower making monthly payments. The reverse mortgage loan only matures when the borrower passes away or if the borrower moves from the residence that was used as equity for the program. The overall reverse mortgage program is still popular due to the failing retirement stock programs, such as IRA or 401K. The reverse mortgage program this year is expected to be up 30 percent from last year.
Shaun Donovan, the Obama administration’s housing secretary states, “business is sound and will make money for the taxpayer in 2010.”
If you would like more information please call (866) 683-3690 or complete our online Reverse Mortgage Information.
Tags: hecm taxpayer subsidy, reverse mortgage stimulus plan, reverse mortgage taxpayer assistance, reverse mortgage taxpayer stimulus
