The House’s Proposal Concerning Reverse Mortgages

Posted by Charles D

October 5, 2009

House appropriations committee

This month Congress will have to set up a committee to discuss the Bills, and come to some kind of a decision. The House’s version was passed in August. It decided that HUD would have to operate without any subsidy – even though a subsidy was not needed before. Earlier discussions had said it would be necessary to subsidize it at a cost of $798,000 because of the rise of housing prices and the economy. The House also reduced the principal limits by about 10% in order to compensate for the lack of subsidy.

A second issue was the lending limit which decided who would be eligible for a reverse mortgage. The current figure of $625,500 was set last year because of the economic problems. This was a raise from $417,000. The House wants to extend the current limits to the end of 2010.

The Senate’s Answer for Reverse Mortgages

The Senate’s version takes a different approach. Instead of making HUD operate within last year’s budget, it proposes that $288 million to given to help reduce the deficit. In addition, HUD will be required to reduce the principal limit by 5%. All new reverse mortgage loan commitments will have an additional 2.66% subsidy fee attached which is designed to raise money beyond the $30 billion that will come in during the next year.

The Senate also seeks to bring down the lending limit to the earlier figure of $417,000. It is looking to see this figure return at the start of the year, on January 1, 2010.

The reverse mortgage lending limits were raised a year ago so that those who were hurt financially by the economic crisis could downsize. The goal was to give them opportunity to sell their home with a reverse mortgage and buy a smaller house from the cash payout. While the House wants to extend the limits, the Senate is looking to reduce them.

New HECM’s May Be Appearing Soon

Another interesting development taking place now is the development of a mini-HECM. One of HUD’s spokespeople had announced that they are working on a mini-HECM now but it is not yet fully developed. They still need to develop some features but it is designed to help people who want a smaller principal. How soon it will come out is to be seen.

Whatever happens in the next couple of months is going to affect the seniors in some way – negatively. Since both versions require that the principal amount be cut, you can expect that seniors will now get less on t