HUD announces changes on reverse mortgage program
Changes include raising the upfront payment from 0.5% to 2% and lowering annual payment from 1.25% to 0.5%
From TRD South Florida: The Department of Housing and Urban Development announced Tuesday that it plans to make changes, including raising premiums, to the reverse-mortgage program for senior citizens. The Trump administration believes the program, which allows lenders to take out a mortgage against the value of their home, needs better financial footing, according to The Wall Street Journal.
HUD plans to raise the upfront payment of the loan program from 0.5 percent to 2.0 percent, and will lower the annual payment from 1.25 percent to 0.5 percent. Changes will only be imposed on new borrowers, while existing reverse-mortgage borrowers will be able to keep existing rates.
Seniors that were formerly able to borrow as much as 64 percent of their home’s value will now only be able to borrow up to 58 percent. 650,000 borrowers currently have reverse loans through HUD and the Federal Housing Administration. In the early days on the Trump Administration, it announced that it would put the brakes on a directive by the Obama administration to reduce FHA mortgage premiums.
A spokesman for HUD Secretary Ben Carson told the Wall Street Journal, “Given the losses we’re seeing in the [reverse-mortgage] program, we have a responsibility to make changes that balance our mission with our responsibility to protect taxpayers.”
The program was created to ease pressure on seniors with fixed incomes and pensions with potential increases in everyday expenses by allowing them to take out loans through the Federal Housing Administration and private lenders. [WSJ] — Grace Guarnieri