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Reverse Mortgage Limits on HUD Lifted by Congress
Dec. 15, 2005 - The U.S. House of Representatives
passed legislation last night that eliminates the cap on the number of
reverse mortgages that can be insured by the Department of Housing and
Urban Development, the National Reverse Mortgage Lenders Association
announced today.
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The Reverse Mortgage to Help America's Seniors Act,
sponsored by Reps. Michael Fitzpatrick (R-PA) and Jim Matheson (D-UT),
amends the National Housing Act by removing the existing cap of 250,000
reverse mortgages that HUD can insure at any given time. Right now,
there are about 150,000 HECM loans outstanding.
A Senate version of the bill introduced by Senator
Rick Santorum (R-PA) is pending approval. Both bills enjoy bi-partisan
support in Congress and are endorsed by consumer groups, such as AARP.
"NRMLA commends Reps. Fitzpatrick and Matheson for
their leadership in getting this bill through the House of
Representatives," said Peter Bell, President of NRMLA.
"As the
popularity of reverse mortgages continues to grow nationally, it's
absolutely critical that the cap is removed to avoid a disruption in the
marketplace."
During the most recent federal fiscal year ending
September 30, HUD insured a record number of reverse
mortgages—43,131—for a fifth consecutive year. The federally insured
Home Equity Conversion Mortgage (HECM) accounts for 90 percent of all
reverse mortgages made in the U.S.
When the HECM program was created by Congress in
1988, a cap was imposed so lawmakers could periodically monitor the
program’s performance and costs to the government. Now that the program
has a track record, Bell said there's no continuing need for a cap
because the HECM program generates sufficient funds to cover its costs
through mortgage insurance premiums paid by borrowers.
A reverse mortgage is a loan that enables
homeowners 62 or older to borrow against the equity in their homes,
without having to sell the home, give up title, or take on new monthly
mortgage payments. Loan proceeds can be used for any purpose, and taken
out as a lump sum, fixed monthly payments, line of credit, or a
combination.
The loan amount depends on the borrower’s age, current
interest rates, and the value and location of the home. A reverse
mortgage does not have to be repaid until the borrower moves out of the
home permanently, and the repayment amount cannot exceed the value of
the home.
After the loan is repaid, any remaining equity is distributed
to the borrower or the borrower’s estate.
A senior’s home does not have to be owned free and
clear to qualify for a reverse mortgage. Reverse mortgages are often
used to retire existing debt on a home.
NRMLA distributes a free information booklet on
reverse mortgages, called Just the FAQs: Answers to Common Questions
About Reverse Mortgages. Consumers can order it by telephone
(1-866-264-4466, toll-free) or at NRMLA’s Web site,
http://www.reversemortgage.org.
The Web site has extensive information on reverse
mortgages, a state-by-state list of lenders, and a reverse mortgage
calculator. To be listed on the NRMLA website, a lender must agree to
abide by the Association’s Code of Conduct and operate in accordance
with its Best Practices.
About source:
NRMLA is a nonprofit trade association, based in
Washington, DC, whose members make and service reverse mortgages
throughout the U.S. and Canada. Members sign a Code of Conduct pledging
to abide by guidelines that assure fair, ethical, and respectful
practices in offering and making reverse mortgages to seniors.
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