AARP Skeptical About Reverse Mortgage Changes

In the wake of the recent suspension of the HECM (Home Equity Conversion Mortgage) Fixed rate reverse mortgage, the industry and seniors are bracing for even more tweaks to this much needed financial tool for retirees.
aarp reverse mortgage
FHA and HUD have been justifying the need for changes to the reverse mortgage products because of a 2.8 Billion Dollar shortfall in the Mutual Mortgage Insurance fund caused by HECM loans.

It should be noted however, that the overall shortfall in the FHA insurance fund is 16 Billion dollars…Meaning that other “forward” mortgage loans account for the majority of the MMI insolvency.

AARP Casts a Skeptical Eye

As AARP points out in this article on their blog; The losses stemming from HECM Reverse Mortgages is not a surprise. It has been a known fact since 2000. AARP, pointedly asks; “So why is this suddenly an emergency situation? Implying that making drastic changes to the reverse mortgage product offerings, is basically taking it out on the backs of senior citizens, who can least afford program changes and modifications.

More Changes Coming

Not only is the fixed rate reverse mortgage no longer available, but HUD is also proposing limiting the upfront draw amount that borrowers are allowed at closing, as well as the possibility of establishing “set aside” escrow accounts for paying future property taxes and insurance.

To add even more constraints for senior borrowers, HUD is planning to implement some sort of “financial assessment,” which may include considering credit scores and financial qualifications pertaining to whether borrowers will be able to afford to maintain their homes after closing on a HECM.

AARP is openly skeptical about how critical it is to allow Congress to make drastic changes to the HECM reverse mortgage products immediately and without allowing time for public comment.

Here is more of what AARP had to say:

“There is another problem facing the HECM program: The 10 percent technical default rate resulting from borrower’s non-payment of property taxes and homeowners insurance is unsustainable—and is not a new development. This problem has plagued the HECM program for many years, and was first discussed in a March 2000 report on the HECM Demonstration Program. Two years ago, HUD said they were developing a rule proposal regarding financial assessments. It is difficult to understand why it is now an emergency.”

Read the full AARP post here.

Free Reverse Mortgage Quote