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Monday, July 23, 2007

More older adults could get reverse mortgage if FHA reform passes

WASHINGTON – July 23, 2007 – Two million more older adults could put their home to work for them during retirement under current Federal Housing Administration FHA reform proposals. The current FHA limit of $362,790 would rise to $600,000 if legislation in Congress becomes law.

U.S. Department of Housing and Urban Development (HUD) Secretary Alphonso Jackson is urging Congress to quickly enact The Expanding American Homeownership Act of 2007. “If you love your home and want to stay in it for years to come, then a reverse mortgage is your best and safest bet for retirement security. Reverse mortgages offer seniors the financial freedom they deserve, and this legislation could help two million more older Americans turn their homes into retirement nest eggs,” said Jackson.

Many older Americans who have lived in their current homes for several years or decades have seen the value of their homes rise dramatically, especially in recent years. However, in high cost areas, home values have surpassed the congressionally mandated cap of $362,790 for obtaining an FHA-backed reverse mortgage. The Expanding American Homeownership Act of 2007 would make reverse mortgages available to an additional two million seniors by raising the FHA’s Home Equity Conversion Mortgage (HECM) loan limit equal to the Fannie Mae/Freddie Mac conforming loan limit.

Eligible older adults would still have to be 62 years of age or older and have paid off their mortgages or have only a small mortgage balance remaining. The loan amount depends on the value of the home, the age of the homeowner and the expected interest rates. The reverse mortgage does not have to be repaid until the borrower moves out of the home permanently.

Last month, HUD announced that more than 308,000 seniors have used the federally-insured HECM loan program since 1990 to convert the equity in their home into cash without having to move. The volume of new reverse mortgages insured by the FHA’s HECM program has increased 10-fold over the past six years.

To read more about the HECM program, go to: www.hud.gov/buying/reverse.cfm.

© 2007 FLORIDA ASSOCIATION OF REALTORS®

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