No major changes needed
By PATRICK CROWLEY
9/2/2003

No major changes are needed to the Federal Housing Administration's (FHA) popular reverse mortgage program, according to a new government analysis.

The study comes as the home equity conversion mortgage program is on pace for record production in 2003.

The Department of Housing Urban Development (HUD) performed the actuarial study, which Congress mandated in 2000, on proposed changes to the program that include:

* Establishing a single national loan limit for Home Equity Conversion Mortgages (HECM), which account for 95% of reverse mortgages, according to the National Reverse Mortgage Lenders Association (NRMLA) in Washington.

* Reducing insurance premiums on HECM refinancings.

* Waiving the 2% MIP on reverse mortgages -- which are available only to senior citizens -- for borrowers who use the money to pay for long-term care insurance premiums.

The study indicates the HECM insurance fund could not sustain loan limits and reduced premium financing.

HUD is pursuing a change that would cut the insurance premium on reverse mortgages refinancings.

FHA requires that on a refinance the borrower only pays the 2 percent MIP on the difference between the new maximum claim amount and the old.

In a published analysis of the study by the Mortgage Bankers Association of America said effect of waiving the 2% MIP insurance premium would "negligible."

"There is little overlap between the typical HECM borrower and the typical purchaser of long-term care insurance," the association said in its analysis.

Reverse mortgages enable homeowners 62 and older to borrow against the equity in their home without selling the home, giving up the title or taking on a new monthly mortgage payment. The mortgage isn't paid off until the borrower moves, sells the home or dies.

The amount of reverse mortgages hit a high of 1,800 in June, according to the NRMLA. Production in June of 2002 was 1,073 loans.

The previous record of 1,637 was set just one month earlier in May, the association said.

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