The likelihood of Federal Housing Administration-insured (FHA) reverse mortgages becoming available to homeowners age 62 and older living in co-ops is unlikely, at least in the near term, according to an article from The New York Times.
Though FHA’s Home Equity Conversion Mortgages (HECMs) are eligible for properties like single-family homes, multi-families with up to four units, condos approved by the Department of Housing and Urban Development (HUD) and manufactured homes, co-ops have largely been omitted.
Co-op advocates had expected this to change as a result of a provision in the Housing and Economic Recovery Act of 2008, which permitted HECM use for co-ops, however, HUD has since drafted regulations barring the use of its reverse mortgages for these property types.
In co-ops, which are owned by a corporation and run by a board, residents own shares rather than property—a structure that bars residents from getting a HECM.
“F.H.A.’s single-family programs are based on loans being secured by real property and the co-op structure does not meet this basic requirement,” a HUD spokesman told the NY Times.
There is hope for the future, however, as individuals with affiliations to the National Association of Housing Cooperatives try to rally support among its members nationwide in efforts to contact HUD about their support of reverse mortgages.
Adding to that hope is the faint possibility of the return of proprietary reverse mortgages that were available to co-ops through some portfolio lenders prior to the housing crash.
While these types of loans are largely unavailable, the situation may change in a year or so, according to comments in the article from National Reverse Mortgage Lenders Association President Peter Bell, who said the New York co-op market may be a very attractive opportunity.
Read more at The New York Times.
Written by Jason Oliva