Big changes are in the near future for the reverse mortgage program in order to create safer loans for seniors who utilize them to tap home equity.
Secretary of the U.S. Department of Housing and Urban Development Shaun Donovan will present the big changes, which will strive to create more conservative lending standards, to the Senate Committee on Banking, Housing and Urban Affairs. The only reverse mortgage insured by the U.S. Federal Government is called a Home Equity Conversion Mortgage.
At a Senate Banking hearing Sen. Bob Corker (R-TN) suggest HUD was "losing its shirt" on the HECM program, without offering numbers. Corker suggested that the HECM program be shut down for 24 months in order to get the current book in line. Donovan responded by asking Congress for more authority in dealing with troubled reverse mortgages. Both agree to meet privately to reengage in the conversation.
In recent years, the private loan industry migrated toward large up-front sums in place of smaller lines of credit. The federal government is hoping that reverse mortgages can shift toward becoming a financial lifeline by helping seniors leverage their equity without selling their homes.
To read an article on HECM concerns by Reuters, click here.