Housing and Urban Development Secretary Shaun Donovan told a Senate appropriations subcommittee today he is open to making changes to the Federal Housing Administration’s reverse mortgage program in order to lessen the risk to the FHA insurance fund. His comments raised concerns that the changes could reduce the number of people served by the program.
Sen. Patty Murray, chairwoman of the Subcommittee on Transportation, Housing and Urban Development, and Related Agencies, asked Donovan if HUD’s first-time HECM subsidy request of $798 million for the fiscal year 2010 budget raises concerns about the overall solvency of the Mutual Mortgage Insurance fund.
Donovan said the request shouldn’t raise concerns because the HECM program uses a very small portion of the fund. And the HECM program is projected to operate at a nearly $1 billion surplus for loans made in 2010.
He said, however, that reverse mortgages are more sensitive to home values and long-term price growth than traditional mortgages, and that HUD has been conservative in its budget projections. He also said the department does have options for changes to the HECM program that he wants to discuss with the committee.
“We have not chosen to raise premiums, given the stress that seniors are under right now,” Donovan testified. “But there are premiums as well as loan-to-value and other factors that we could make changes on that would eliminate that need for the cost. Those are obviously choices about how many seniors we want to be able to help versus the cost in the program.”
Generation Mortgage Chairman Jeff Lewis said today that consumers should take notice of Donovan’s comments. “The chances that this program will get better is zero,” Lewis said.
HUD is going to do have to do something that makes it “highly likely” the program would get worse, Lewis said. For seniors considering a reverse mortgage the “time to do it is now,” he added.
Source: Subcommittee hearing
