While the Department of Housing and Urban Development is maintaining some of its operations during the government shutdown, it has ceased insurance of Home Equity Conversion Mortgages due to a cap on the number of HECMs that can be insured by law.
Outlined in a contingency plan for lenders and other HUD partners spelling plans for a lapse in appropriations during the shutdown of the federal government, and stressed in a notice to lenders Friday, HUD said while it will continue to assign case numbers to reverse mortgage loans, it cannot insure them.
“FHA does not have the authority to insure additional HECMs during this period due the statutory cap limiting the number of HECMs under the HECM Program,” HUD states in its contingency plan.
The agency is continuing to insure forward loans.
The distinction is presented by a statutory cap on HECMs that was extended in 2006 to 275,000 loans and has been extended, but never changed, since then.
Lenders are continuing to accept applications and process loans, according to a newsletter from the National Reverse Mortgage Lenders Association.
“Because lenders have a 60-day window to get their loans insured by FHA, companies for the time being are still originating and funding reverse mortgages,” NRMLA wrote Friday.
Written by Elizabeth Ecker