BIG PRINCIPAL LIMIT REDUCTION NEEDED
WITHOUT $250 MILLION HECM SUBSIDY
David H. Stevens, Assistant Secretary of Housing for the Federal Housing Administration (FHA) recently testified to the House Financial Services Subcommittee on Housing and Community Opportunity. He voiced his strong support of the administration’s reverse mortgage program. What happens there can have some major consequences to those Seniors contemplating an Oregon Reverse Mortgage in the future.
The need for this type of program is greater now than it’s ever been, due to increasing medical costs, declining employment/incomes, and less ‘savings’ in various types of pension funds/retirements accounts.
This comes as the Office of Management and Budget (OMB) requested an appropriation of $250 million to support the Home Equity Conversion Mortgage (HECM) in its FY2011 budget.
Stevens, referencing a survey conducted by AARP in 2006 told the committee the product has provided seniors with much-needed financial relief and was primarily used to pay for long term health care, enable home repairs and provide peace of mind that housing expenses now and in the future could be met.
In addition, Stevens said the program plays an important role in allowing seniors to age in place. “Keeping seniors in their homes and communities, close to familiar support networks, puts less pressure on our nation’s overextended nursing home infrastructure and the public resources that support it,” says Stevens.
According to his testimony, FHA’s analysis showed that to maintain the viability of the program for FY2011, an increase if the annual mortgage insurance premium from 0.05% to 1.25% and further reducing the principal limit factors (PLF’s) of approximately one to five percent, depending on the age of the borrower is necessary.
“Without the budget request, we would be forced to reduce the PLFs by an additional 21% in FY2011. This would significantly reduce the amount of funds that would be available to seniors (more than 30%), which, on average is a $23,000 to $27,000 impact,” said Stevens.
He closed by saying, “Any additional steep cut to the PLFs will result in serious decline in program level as HECMs would no longer be viable to many seniors who need to access their home equity while staying in their homes.”
What does this mean for you, if you are an Oregon Senior that has been contemplating a reverse mortgage?
NOW, rather than later might be the best opportunity to take advantage of all the benefits of a Reverse Mortgage. HUD has already cut the PLFs by 10% in September of 2009. A recent informal survey conducted by NRMLA showed that the 10% cut resulted in 20% fewer seniors qualifying for a Reverse Mortgage.
If you have questions about a Reverse Mortgage we will not pressure you to take one out, but it may be in your best interest to check out one now, rather than later. Please contact one of us today at 541-342-7576. Alpine Mortgage Planning is located at 1200 Executive Pkwy., Ste. 100, Eugene OR 97401. You can also e-mail Laurie here or Fred here. We are here to help you make the decision that is right for you. Reverse Mortgages are not for everyone, but they are an excellent choice for some people. Isn’t it time that you checked out the advantages of a Reverse Mortgage?