U.S. govt reverse mortgage program cap increased
By Lynn Adler
NEW YORK, May 13 (Reuters) - A federally insured reverse mortgage program, which frees up cash for senior homeowners by tapping into their house equity, has a new lease on life.
The cap on the total number of these mortgages insured by the Federal Housing Administration, known as Home Equity Conversion Mortgages (HECMs), was on the verge of being met before new legislation this week boosted it to 250,000 from 150,000 loans.
The higher cap was tucked into a war funding bill, called the "Emergency Supplemental Appropriations Act for Defense, the Global War on Terror, and Tsunami Relief," signed by President Bush.
In a reverse mortgage, homeowners aged 62 or older can get a monthly check or lump sum payment against their home's value. This enables seniors who may be asset-rich but cash-poor to keep their houses by raising money from home equity.
A more permanent solution is being worked on by mortgage industry groups.
"While the supplemental appropriations bills provides a temporary solution, the National Reverse Mortgage Lenders Association is working with the leadership of the Financial Services Committee in the U.S. House of Representatives to introduce legislation very soon that will either permanently remove the cap or raise it to a much higher level," said Peter Bell, president of the reverse lenders association.
FHA is the Department of Housing and Urban Development division that insures reverse mortgages.
FHA's HECM loans account for 90 percent of all reverse mortgages in the United States, according to Bell.
More than 140,000 of the loans had been created since the program's start in 1989. Growth has been exponential, with more seniors living longer and facing higher expenses.
Over 37,000 of these FHA loans were issued last year, the amount nearly doubling each year this decade, according to the Mortgage Bankers Association.
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Source: Reuters
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