Last year, the Federal Housing Administration requested a $1.7 billion taxpayer-funded bailout from the U.S. Treasury, the first in the nearly 80-year history of the FHA. This means that the FHA is back on track and does not anticipate needing any additional assistance in fiscal year 2015.
This is good news for the federally insured HECM Reverse Mortgage program, since both the HECM and FHA’s forward mortgage programs are expected to have positive cash flow. The FHA Reverse Mortgage Program is expected to have a negative subsidy rate of .23%, a positive indication that the HECM program is expected to perform at a slightly above break-even point. The program must operate at least at par.
The earlier bailout of $1.7 billion was largely due to the fact that 7-10% of reverse mortgage recipients defaulted on their mortgages by failing to pay property taxes and homeowner’s insurance. The FHA has indicated that the positive outlook for the program was due to assisting homeowners facing foreclosure through loss mitigation assistance.
The industry is expecting HUD to issue new guidelines and requirements for financial assessments of homeowners during the reverse mortgage application process. These guidelines and requirements will further add to the stability, sustainability and growth of the reverse mortgage program.
If you have a reverse mortgage question, call Angella Conrard at 866-949-7030. I will be happy to answer your questions, be of service, and help you live your most comfortable life!
NO SALES! I promise.