The Federal Housing Administration said it’s willing to make several changes to the programs it offers, one of them being a moratorium of the Standard Fixed Rate Reverse Mortgage. In a letter published Tuesday to Senator Bob Corker (R-TN), Acting Assistant Secretary Carol Galante said the FHA is willing to make the changes by January 31, 2013.
“FHA is preparing a policy directive that will result in the immediate cessation of the use of the Standard Fixed Rate HECM product,” said Galante in the letter. “This product currently represents a large majority of the loans insured through the HECM program, with the Variable Standard Rate Standard product and the HECM Saver products representing the balance.”
The HECM fixed rate program is one of the reasons the program is showing an estimated economic value of negative $2.8 billion according to an independent actuarial analysis published earlier this year.
“Eliminating the use of the Fixed Rate Standard program is an immediate stop gap measure,” said Galante.
In addition, the agency plans to make several other important changes including establishing formal guidelines for conducting financial assessments of borrowers and the creation of set asides for payments of taxes and insurance.
As a result of agreeing to the changes requested by Corker, he is now agreeing to support Galante as the Commissioner of FHA.
“I’ve been working closely with Secretary Donovan and Acting Commissioner Galante over the past few weeks on ways we can put FHA on sound financial footing. While this is only a first step, I am encouraged that Acting Commissioner Galante has committed to structural reforms that we both believe put FHA in a much stronger position. Given the reforms she is committed to, I believe that having an accountable commissioner with her resolve and expertise will be in the best interest of the taxpayer,” said Corker.
Exactly how the changes could be implemented isn’t clear. When asked whether they would need to be added to legislation, a spokesperson for the Department of Housing and Urban Development declined to comment.
View the letter here.