Almost two months back I wrote regarding the monies being spent in the stimulus package that went to things like tunnels for turtles, guard rails for dried lakes, rehabs for airports with very not many customers, repairs to train stations closed for decades and many more, but we were appalled that our US Congress was taking into consideration Bills which would force our seniors bear the cost of the HUD reverse mortgage plan.
I felt that if Billions and Trillions of dollars can be used in support of these and other projects like skim board parks, hundred million dollar courthouse renovations, scientific grants used for laser beams and wetlands defense, that surely our Congress may possibly stumble on the money to help our seniors continue to use the HUD Home Equity Conversion Mortgage (HECM otherwise “Heck-um”) program to continue to stay in their homes. Unfortunately, it looks like we were incorrect!
Just last week a news piece came out that the US was to fire $36.7 Billion concerning foreign aid, to wealthy countries and countries who don’t like us. That’s correct, we can discover almost $40 Billion meant for countries who are already wealthy, or would like to witness us fall into the ocean, but we don’t have the money to support a plan that helps our senior homeowners stay in their homes without slashing the benefit amount to our senior homeowners. Our mothers, fathers, grandmothers and grandfathers aren’t equally crucial as the money we will send off to North Korea, Cuba, Venezuela, Libya, Bolivia, Russia and others.
It seems that not simply do we come up with money intended for all these pet projects, but Congress is slating money for healthcare reform with the intention of by all accounts may well further slice benefits to seniors in the form of cuts to Medicare and Medicaid. This week, HUD announced with Mortgagee Letter 2009-34 that Principal Limit Factors are being subtantially reduced effective October 1, 2009 to “…assist with the viability of the program”.
It seems that the HECM program was in no way intended to function with a credit subsidy as explained by the Commissioner, David Stevens, in a call to the Reverse Mortgage Lenders Association (NRMLA). He remained amicable to re-engineering the mortgage insurance premiums or making other changes but indicated that there was nothing HUD might do since the plan needed to function exclusive of need of a subsidy.
According to the notice issued by the NRMLA, several of the bigger reverse mortgage lenders did an analysis on the portfolios of loans they have settled to year, and that 10% reduction of benefits under the plan (this is the amount HUD intends to lessen the benefits) would have left approximately 21% of all the borrowers with too little proceeds to pay off the existing mortgages on their homes. Said a bit differently, more than one-fifth of all reverse mortgages completed would not have been able to be settled after October 1, 2009, unless the borrowers had supplementary funds they could bring to closing!
This means that all the borrowers who used the HECM Reverse Mortgage, barely paid off their liens to keep their homes throughout these exceptionally tough financial period would be NOW be forced to move; even worse, if they were now delinquent on their mortgages, the seniors may have been foreclosed upon if they didn’t have the additional money to cover the reduced benefit amount.
This year alone, 1st Metropolitan NRMC has helped over two dozen seniors homeowners, who were behind on their current mortgage due to the current economic and financial environment, and, who would have not had the additional funds needed under the proposed changes, and would not have been able to keep their homes. Approximately a dozen were presently in foreclosure and, unquestionably, would have lost their homes with these changes.
Seniors already pay a great portion of this program since the single prime fee for any reverse mortgage transaction is typically the HUD mortgage insurance. On the largest of transactions, this is in excess of $12,500 in cost paid directly to HUD to INSURE the loan. Additionally, all borrowers also pay one half of 1% (0.5%) for monthly mortgage insurance on their loans. I have no way of knowing what claims have been paid due to the current mortgage/real estate market adjustment; surely the HECM loans are no worse than the forward, or regular mortgage loans with the intention of HUD has insured through FHA.
The office of Management and Budget (OMB) came up with the statisticsics to determine the projected deficit in the program, and I, for one do not know how they were derived (if I did I might take exception with their numbers, and express this article differently). But to make our seniors pay yet again, while we cover the billions and trillions in spending for superfluous programs and projects while our seniors need our help and support is criminal! This is just one added cut to the senior population while we waste for pet projects and for things few can justify… Oh, and yes, it seems they could found the money to give Congress a RAISE in budget benefits.
I ask every person, even if you are not a senior, to cal, write, fax, or email (or do all 4!) your representative at http://www.Usa.Gov/Contact/Elected.Shtml and tell them that you strongly urge them to discover a way to fully fund the HUD HECM program and instruct HUD to revert back to the existing benefits so that our seniors do not have to pay the price by way of reduced benefits.
It’s incredulous to me, that HUD or Congress would even consider such a modification at this point in time; a challenging time when our seniors need help more than ever. It is my sincere hope that the Congress hears from a millions of concerned citizens before it’s too late for many seniors.
What if… we modernize one less useless airport, leave out a a small amount of guardrails for dried lakes, build one or two fewer skateboard parks or just forward much less money to the nations who are already wealthy or otherwise postured against the US (Yemen or Jordan?)… In the name of our parents and grandparents so that they can stay in their homes?
I for one, don’t think that’s asking too much.
Larry Benton CSA® with 1st Metropolitan Mortgage, is a Certified Senior Advisor®, and specializes in helping senior clients continue to meet their financial goals. When you or one of your family members finds yourself needing real answers and real solutions to senior finance challenges, confidentially contact Larry at 410.573.0909 or lbenton@theReverseAdvisor.net