S.1710
Title: A bill to amend section 255 of the National Housing Act to remove the limitation on the number of reverse mortgages that may be insured under the FHA mortgage insurance program for such mortgages.
Sponsor: Sen Santorum, Rick [PA] (introduced 9/15/2005) Cosponsors (2)
Related Bills: H.R.2892
Latest Major Action: 9/15/2005 Referred to Senate committee. Status: Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.

The National Reverse Mortgage Lenders Association (NRMLA) is pushing to to eliminate the legislative cap on home equity conversion mortgages (HECMs) - the federally-sponsored (and most common) form of reverse mortgage. The proposal is also supported by AARP.

Legislation to remove the cap was passed by the House of Representatives in December and now awaits Senate approval.

According to NRMLA, without the legislation, HUD can only insure a total of 250,000 reverse mortgages, a cap that could be reached in the next 12-24 months given the growth in HECM popularity.

Interestingly, the NRMLA’s briefing paper in support of the proposal indicates that the HECM program is also a big money-maker for the government:

NRMLA commissioned Milliman USA to undertake an actuarial analysis of the FHA HECM program. The Milliman USA study concludes that the mortgage insurance premium currently assessed under the HECM program provides a vast sum of surplus income to the FHA insurance fund.

Presumably, eliminating the HECM cap isn’t being pursued as a means to raise additional revenue for the government. And, hopefully, the next policy priority will be to share some of the “vast sum of surplus income” with the seniors taking out HECM loans via lower fees.

A Few More Related Articles of Interest:

Using a Reverse Mortgage to Get Out of Tight Spots

Texas Reverse Mortgage

Reverse Mortgage as a Tax Saving Tool

New Reverse Mortgage Tools Introduced

Lending Tree Study Discusses Seniors Attitude Towards Debt and Reverse Mortgages