Reverse Mortgage Subsidy or Principal Limit Factor Reduction?

On a daily basis, we hear about the economic crisis and the hardships plaguing our country, from the loss of jobs, to high unemployment rates, crashing property values and companies closing up shop. It’s disconcerting to say the least. What I find to be more disturbing is that our lawmakers would reject a $789 million dollar subsidy to FHA for the HECM product, a product which actually helps our seniors during such tough times to get cash from the equity in their homes and maintain independence. Instead, the House recommends FHA reduce the principal amount a senior can borrow.

In these tough times, it is bad enough that our aging population has lost astronomical amounts in sustainable income through investments, to now have appropriator’s in the House rejecting the subsidy and offering up recommendations that only add to the hardship. What message does that convey to the people of our country? That our government is willing to hand out stimulus monies to companies or to other subsidy requests that have no bearing or impact on our current crisis, but not to a program designed to help our aging population, a protected class.

Since the inception of the HECM product in 1989, FHA has operated on a negative (positive profit) subsidy until now. Perhaps as an alternative solution, offer up a recommendation that would help our seniors during such hardships. For instance, paying the $789 million subsidy and recommending that FHA come up with a plan thereafter to conduct any necessary annualized analysis that would decrease the principal limit factors based on any economic shortfalls with the HECM product for sustainability.

Let me be clear when I say that I am not opposed to a reduction in FHA’s principal limit factors for HECMs, I see value in doing so in the future. As for now, I feel this not the time to implement such a process for the aforementioned reasons.

My views are shared with many when I state that we would like to see our government take a different position and change the message they are currently sending to the public. There benefits to the reverse mortgage product are numerous, it seems however, this understanding has not been fully embraced by all members of the Legislative Branch. I feel it would be a great discredit to our senior population to have uninformed decision making and comments result in repercussions adversely affecting perspective reverse mortgage borrowers who could truly benefit from the product.

Shawna James is the Executive Vice President of Legacy Home Financing

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