Reverse Mortgage Guide

Back in January we reported that of roughly 375,000 FHA reverse mortgages which had been issued since HUD began the program, only 1,609 claims had been made against the reverse mortgage insurance plan.

That sure doesn’t sound like a lot of claims, but part of the reason for the low number is that most home equity conversion mortgages (HECMs) are recent — simply put, they have not been outstanding long enough to result in the possibility of a claim.

Now we know another part of the reason for steep insurance premiums and few claims: HUD is running a profit on its FHA insurance program.

According to Luke Mullins at U.S. News & World Report, the FHA now runs a “surplus.”

Speaking before the National Association of Realtors at their mid-year meeting in Washington, Mullins reports these words from FHA Commission Brian Montgomery:

“We normally, at the end of the day, have a surplus that we then give to the U.S. Treasury. And we want to keep the FHA that way.”

A surplus? That sounds like a profit, looks like a profit. Oh wait, it IS a profit.

Under H.R. 3221, reverse mortgage origination fees will be significantly reduced and a maximum fee will be imposed.

That’s great. But the bill doesn’t say anything about reducing HECM insurance premiums.

Is it the intent of Congress that HUD should be generating a profit from the insurance fees extracted from senior citizens? What is money given back to the Treasury except a tax? And since when was the Constitution revised so that HUD could originate taxes, a job that used to be reserved for the Congress?

Reverse mortgage premiums should be seen as something sufficient to cover costs — and not as a cash cow for the U.S. Treasury, something used to hide our vast federal deficit.

For the full story by Mr. Mullins, see: FHA Chief Criticizes Rescue Plan.

This entry was posted on Tuesday, May 27th, 2008 at 12:12 am and is filed under Reverse Mortgage . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.