The Reverse Mortgage to Help America's Seniors Act, sponsored by Reps. Michael Fitzpatrick and Jim Matheson, amends the National Housing Act by removing the existing cap of 250,000 reverse mortgages that HUD can insure at any given time, the association said.
A Senate version of the bill introduced by Sen. Rick Santorum is pending approval, and both bills enjoy bi-partisan support in Congress and are endorsed by senior citizens' advocacy group AARP, according to the reverse mortgage association.
"NRMLA commends Reps. Fitzpatrick and Matheson for their leadership in getting this bill through the House of Representatives," said Peter Bell, President of NRMLA, in a statement.
"As the popularity of reverse mortgages continues to grow nationally, it's absolutely critical that the cap is removed to avoid a disruption in the marketplace," Bell said.
During the most recent federal fiscal year ending Sept. 30, HUD insured a 43,131 reverse mortgages, a record number, for a fifth consecutive year, the association said. The federally insured Home Equity Conversion Mortgage, or reverse mortgage accounts for 90 percent of all reverse mortgages made in the U.S., according to the reverse mortgage association.
When Congress created the HECM program in 1988, a cap was imposed so lawmakers could periodically monitor the program's performance and costs to the government, according to the association.
Now that the program has a track record, the association believes there's no continuing need for a cap because the HECM program generates sufficient funds to cover its costs through mortgage insurance premiums paid by borrowers.
A reverse mortgage is a loan that enables homeowners 62 or older to borrow against the equity in their homes, without having to sell the home, give up title, or take on new monthly mortgage payments.
Loan proceeds can be used for any purpose, and taken out as a lump sum, fixed monthly payments, line of credit, or a combination.
The loan amount depends on the borrower's age, current interest rates, and the value and location of the home. A reverse mortgage does not have to be repaid until the borrower moves out of the home permanently, and the repayment amount cannot exceed the value of the home. After the loan is repaid, any remaining equity is distributed to the borrower or the borrower's estate.
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