FHA, hemorrhaging money, to scale back reverse mortgage program

With the Federal Housing Administration losing ever more money, the agency announced that it would tighten mortgage standards for certain homeowners and scale back the scope of its reverse-mortgage program for seniors, the Wall Street Journal reported.

The changes, effective Jan. 31, will include the suspension of a popular reverse-mortgage option that allows Americans 62 or older to take cash out of their homes and receive a large, upfront payment. Carol Galante, the FHA’s acting commissioner, called the move “an immediate stopgap measure.” The agency will also take steps to make risk management and consumer protection for reverse mortgages more robust, she said.

Last month’s independent annual audit of the FHA showed that the agency’s reserves would be insufficient to cover future projected losses and projected a $16.3 billion deficit, of which $2.8 billion stemmed from the reverse-mortgage program. [WSJ] — Hiten Samtani