NY Times: FHA Reverse Mortgages for Co-ops Still Unlikely, For Now

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.

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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

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  • >>HUD has since drafted regulations barring the use of its reverse mortgages for these property types.

    I haven’t seen any of those regulations. Nothing has been done to implement co-ops, since President Bush signed HR 3221. How could HUD draft regulations that disagree with HERA?

    >>proprietary reverse mortgages that were available to co-ops through some portfolio lenders prior to the housing crash

    I don’t know where the Writer got that from … there has never been a proprietary reverse mortgage available for co-ops. Fannie Mae’s Homekeeper was the only program available, and it wasn’t proprietary. If there were any proprietary programs available, I’d have originated a lot of them.

  • Coops, really? While proprietary reverse mortgage lenders MIGHT add coops to their approved home types, don’t expect HUD to follow suit unless somehow shares of stock in a coop are recognized by state law as real property.

    And exactly what is this supposed to do: “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”? Rather than laudable this action seems not only far too late but also down right laughable. This is like thinking that if tax reform advocates get together, they will be able to get the IRS to change tax laws themselves.

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