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Reverse Mortgage Tips

Vera Gibbons spoke with Julie Chen about when is a good time for a reverse mortgage and what to look out for.

The Fed's Reverse Mortgage Fiasco

Because of the largesse of federally financed subsidies in the Federal Housing Administration’s reverse-mortgage program, the federal government has gradually crowded out private insurers from the market for these financial products since the program began in the late 1980s.

Indeed, amid the multitrillion -dollar maze of federal insurance and guarantee programs lies the Federal Housing Administration Home Equity Conversion Mortgage program—an insurance program providing loss coverage on reverse-mortgage originations backed by federal taxpayers.

The loan program simply has become a severe financial burden for federal taxpayers. The Federal Housing Administration reports that the Home Equity Conversion Mortgage program faces a financial shortfall totaling roughly $14 billion in fiscal year 2017.

To avoid any further compounding of the fiscal fiasco, policy leaders should wind down the federal Home Equity Conversion Mortgage program, and in the interim certainly refrain from any misguided reforms that would increase moral hazard, put more taxpayer money at risk, and ultimately continue to crowd out private mortgage insurers from the market for reverse mortgages.

Opinion FHA borrowers pay a steep price to keep reverse mortgage program afloat

The fundamental conclusion of the Fiscal Year 2017 Actuarial Review is that the financial problems of the FHA Home Equity Conversion Mortgage program keep getting worse. Exacerbating this problem is its impact on millions of homeowners in FHA's flagship single-family program who are still paying very high insurance premiums for the life of their FHA loans to subsidize the operations of the reverse mortgage program.

HUD had it right in its August statement announcing needed changes to the HECM program. At that time, HUD said "younger, lower-income homeowners are routinely bailing out the HECM program through the mortgage insurance premiums that they pay."

A recent National Mortgage News article highlighted the current problems of the reverse program and their adverse impact on the FHA's long-standing single-family program.

Removing reverse mortgages from the Mutual Mortgage Insurance Fund is the obvious and fairest solution to this problem. HUD Secretary Ben Carson called it a "worthy pursuit" in response to a question at his recent congressional testimony. The reverse mortgage program could be moved to its own fund or returned to the General Insurance Fund, a fund that HUD has said is designed to "address specialized financing needs."

What is the downside of reverse mortgages?

My in-laws are elderly (in their mid and late 80s) and own their home outright. The in home care expenses for my father in law are mounting and reverse mortgaging their home seems to be the answer.

This product has become ever more popular with the aging society. Because of this these loans are changing almost daily. The downside to this type of loan is your house is appreciating after you lock in the payment rate.