Reverse Mortgage Loan Blog

The AARP wrote a letter to Federal Housing Commissioner David H. Stevens stating it was concerned that the 10% cut to home equity conversion mortgage loan amounts will prevent thousands of seniors from avoiding foreclosure.

The AARP is “very disappointed” with the administration’s withdrawal of its fiscal 2010 request for a credit subsidy for the HECM program and for the issuance of mortgagee letter 2009-34, said David P. Sloane, senior vice president of government relations and advocacy, in the Oct. 9 letter. The AARP sent a copy of the letter to The Reverse Mortgage Alert.

The $798 million HECM subsidy request is still in place, said Department of Housing and Urban Development spokesman Lemar Wooley in an email. Stevens has recently stated that the FHA will not need a subsidy due to expected loan losses. Wooley said the fact that the FHA will not need a subsidy for the forward mortgage program is unrelated to the reverse mortgage product. However, Congress did not enact the appropriation request and, in a continuing resolution, required HECM to break even, he said.

In the Sept. 23 mortgagee letter, Stevens said the new principal limit factors needed to be implemented by the start of the new fiscal year on Oct. 1 to “assist with the viability of the program.”

The AARP letter cited National Reverse Mortgage Lenders Association estimates that the principal limit reduction would leave 23,000 to 25,000 older homeowners unable to get enough money from a HECM to pay off a current mortgage. Sloane stated that more than 100,000 homeowners still able to use the program “will net less equity without a commensurate reduction in the fees or insurance premiums.”

Sloane stated that the AARP “strongly objected” to the Congressional Budget Office’s home valuations, which were the basis of HUD’s subsidy request and reduced loan amounts. He urged the administration and the FHA to re-estimate the need for a credit subsidy “at the earliest opportunity.”

He also asked that the FHA consider other ways to mitigate the problem of reduced HECM amounts for seniors in danger of losing their homes to foreclosure including a waiver of up-front fees, negotiated adjustments to current loan principal amounts, and “other forbearance measures.”

“AARP is committed to working with HUD and the administration to assure that the HECM program remains both a cost-effective program for taxpayers and a viable mortgage alternative for America’s seniors,” Sloane said in the letter.

The FHA declined to respond directly to the letter.

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