National Mortgage News is reporting that House appropriators have instructed the Federal Housing Administration to cut the proceeds seniors receive when taking out a home equity conversion mortgage in fiscal year 2010 or Oct. 1.
In June, Housing and Urban Development Secretary Shaun Donovan told a Senate appropriations committee that he was open to raising premiums or restricting eligibility for reverse mortgages to avoid the $798 million taxpayer subsidy that was requested for the program.
"We do have options for changing the HECM program," Donovan told a Senate appropriations committee in June, referring to the FHA’s Home Equity Conversion Mortgage.
The House Appropriations Committee approved the appropriations bill on July 17 instructs HUD to reduce the principal amount a senior can receive on a HECM.
Rep. Tom Latham, R-Iowa, told Newsday that he identified almost $800 million worth of budget savings by lowering subsidies in the housing program that guarantees reverse mortgages for older people. Latham proposed slightly lowering the amounts of the federally insured mortgages to eliminate the need for the subsidies. How much it would lover the principal limit is unknown.
Peter Bell, president of the National Reverse Mortgage Lenders Association, told National Mortgage News that the committee’s action "reduces what seniors will get, which is problematic at a time when there is great need."
"We might find that some people that want a reverse mortgage won’t be able to get enough money to pay off their existing mortgage. They will be forced to sell the house and move."
Peter Bell sent the following email to RMD:
The appropriations bill reported out of committee (and awaiting floor action in the House) instructs HUD to adjust principal limit factors to a level that would allow the program to continue to operate without additional credit subsidy. This bill must still be passed by the House. Then, the Senate must pass its version of the Transportation-HUD appropriations bill, which it hopes to do prior to adjourning on August 7 for summer recess But might not).
Once Congress returns in September, a conference committee would have to negotiate any differences between the House and Senate versions of the appropriations bill, so there are still a few steps left in this legislative process.
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