With a $250 million budget shortfall for the Federal Housing Administration’s reverse mortgage program, former FHA Commissioner Brian Montgomery told the Spokesman Review it’s a “pivotal” year ahead for the reverse mortgage industry.
Montgomery has always been a big supporter of the program and says the product “helps solve a social need” for seniors who need to tap the equity in their homes. “Because of cash shortfalls in the program, the amount seniors can borrow will be reduced for the second time. In the big picture, the number we’re talking about amounts to a rounding error in the federal budget.”
The rounding error that Montgomery is referring to would have a huge impact on the reverse mortgage industry.
Without an appropriation from Congress for FY 2010, the US Department of Housing and Urban Development was forced to cut the principal limits by 10% across the board. As a result, endorsements are down 39% from the previous year according to data from Reverse Market Insight.
“It’s a pivotal year for reverse mortgages and HECMs because of all that’s gone on,” said Montgomery, who stayed on as FHA commissioner through the first six months of the Obama administration in 2009. “Seniors look at all these layers that start with the bad press and become reluctant about participating.”