The Reverse Mortgage Program is a Boon to Seniors
As published in the Washington Post on Sept. 11, 2017:
Regarding the Sept. 6 editorial “A welcome reversal”:
The now 30-year-old federal reverse mortgage program enables older adults to use the equity in their homes to supplement retirement savings and support aging in place.
In response to concerns that borrowers were spending their money too quickly without preserving cash to pay for property taxes and insurance, the Department of Housing and Urban Development introduced new underwriting standards and sometimes sets aside loan proceeds to cover those costs over time. The highly effective policy has reduced defaults by nearly three-quarters on new loans and makes loans safer for the borrowers and the fund.
The Federal Housing Administration insurance program was intended to be self-sufficient and run with a negative credit subsidy. Managing the program to be net-neutral is based on many factors, including assumption-based cost projections that look 30 years into the future. A 2015 annual report showed the program running a profit that bolstered the fund. In 2016, the models showed a loss. That shows we need better modeling, not that the reverse mortgage program is hindering young people from buying new homes.
There are ways to reduce costs to the fund that would not penalize people who want to use their home equity in retirement, as more than 1 million senior households have done through the federal reverse mortgage program.
Peter Bell, Washington
The writer is president and chief executive of the National Reverse Mortgage Lenders Association.