Mortgages help seniors supplement their incomes; HUD says program needs sounder financial footing
The Trump administration is planning to raise premiums and place tighter loan limits on some borrowers in a mortgage program that helps seniors supplement their incomes, reports The Wall Street Journal.
The U.S. Department of Housing and Urban Development on Tuesday announced the changes in a letter to lenders to the so-called reverse-mortgage program, which allows seniors to take out a loan against the value of their home. The Trump administration feels the changes are necessary to put the program, which is backstopped by taxpayers, on a sounder financial footing, The Journal reported.
“Given the losses we’re seeing in the [reverse mortgage] program, we have a responsibility to make changes that balance our mission with our responsibility to protect taxpayers,” HUD Secretary Ben Carson said through a spokesman.
The modifications won’t apply to borrowers with existing mortgages, but will affect those who take out new loans. Some 650,000 borrowers have outstanding reverse loans insured by the Federal Housing Administration, which is part of HUD.
The Journal said most new borrowers will pay bigger premiums upfront but lower ones over the life of the loan, lessening the risk to taxpayers if seniors live longer than predicted. Borrowers will now pay 2% of the amount of the home’s value upfront and 0.5% annually over the course of the loan.