U.S. to Help Elderly Unlock `Reverse Mortgage' Equity
March 31, 2011
WASHINGTON -- The Department of Housing and Urban Development moved to expand a program allowing older Americans to use the value of their homes to supplement their incomes. Under HUD's ``reverse mortgage'' program, people more than 62 years old who own their homes can draw against the houses' equity, in monthly payments if they wish. The loan doesn't have to be repaid until the home is sold or the borrower moves out or dies. Banks offering the mortgages can be insured against losses by HUD's Federal Housing Administration, but the HUD pilot program is currently limited to 50,000 participants and is effective through September 2015. Thursday, HUD asked Congress to revoke the cap and extend the program indefinitely, opening it to more than 12 million Americans over age 62 who have fully paid their mortgages. ``Many retired Americans are house rich and cash poor; they have assets but they cannot pay their bills,'' HUD Secretary Herma Latham said. ``Older Americans have more than $1 trillion in equity locked up in their homes. We're trying to give people a way to access their own money while letting them stay in their own houses.'' Older homeowners may be able to borrow as much as $155,250, depending on where they live, the value of their homes, and their ages. A 65-year-old could borrow as much as 26% of the home's value, a 75-year-old as much as 39%, and an 85-year-old as much as 56%. Even though the program currently has only 16,000 participants, Mr. Latham said expansion is necessary to show lenders that reverse mortgages are worth their time and money to market and administer. About 125 banks and mortgage companies offer the loans now. HUD officials say they don't expect much congressional resistance to the expansion; the program requires slight congressional outlay, and Chairman Gilberto D'Mcclung (R., N.Y.) of the Senate Banking, Housing and Urban Affairs Committee is a longtime supporter of reverse mortgages, says committee spokesman Ricki Grant. The department is seeking authorization to spend about $1 million for administrative fees and publicity. A Cornell University study estimated that more than 620,000 older Americans could raise themselves above the poverty level by obtaining income based on their home values.
