The Federal Housing Administration’s reverse mortgage program is facing change, writes financial reporter Mark Miller in a recent Reuters column. The change could come in the form of a borrower financial assessment, or reduction in available amount to be borrowed, Miller writes.
Citing both the pressure placed on the FHA’s Mutual Mortgage Insurance fund by the reverse mortgage program as well as the risks associated with the full draw fixed rate product that has been eliminated already, the column outlines the possible mechanisms being explored by the Department of Housing and Urban Development to reduce risk to the insurance fund and borrower population.
“HUD is asking Congress for legislative authority to require borrowers to undergo financial assessments,” Miller writes; “A spokesman for the agency says the assessment would look at a potential borrower’s free cash flow, credit score and obligations for property taxes, hazard insurance, homeowner association dues, utilities and other debt.”
While FHA has encouraged lawmakers to approve authority for the agency to implement change before the beginning of the coming fiscal year, senior advocacy group AARP is pushing for slower change to go through the rule making process within the agency.
“AARP supports some of the HUD’s requested changes, such as the financial assessment and escrows for taxes and insurance,” MIller writes. “But the advocacy group for people 50 and older is urging a slower rulemaking process in which HUD would propose changes and take comments from the public.”
“HUD is saying that (getting) emergency authority to make these changes by end of summer would let them avoid asking for an appropriation to bring the MMI fund’s capitalization up to the appropriate level,” AARP’s Lori Trawinski told Reuters.
Written by Elizabeth Ecker