A reverse mortgage enables senior homeowners to convert part of the equity in their homes into tax-free income without having to sell the home, give up title, or take on a new monthly mortgage payment. Reverse mortgages are available to individuals 62 or older who own their home. Funds obtained from the reverse mortgage are tax-free. But the instruments are complex and may not be a good fit for all seniors.
FHA is now shouldering a greater portion of the residential loan load and its insurance component has come under greater scrutiny because of it.
In a letter to all reverse mortgage lenders dated Sept. 23, 2009, David H. Stevens, HUD's new assistant secretary for housing and federal housing commissioner, said changes in the agency's popular Home Equity Conversion Mortgage program were necessary "to assist with the viability of the program."
The result is a 10 percent reduction in what HUD labels as the "principal limit factor" on all reverse mortgages applied for on or after Oct. 1, 2009. This factor reduces available proceeds to reverse mortgage borrowers.
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