A little background is needed to explain what happened.
About a month ago, HUD asked Congress for about $800 million dollars extra to fund possible future shortfalls in the FHA Home Equity Conversion Mortgage (HECM) program. This is the FHA Reverse Mortgage program and the request was based completely on conjecture about how many claims there could be in the future and how much they will cost.
A claim occurs on a Reverse Mortgage when the borrowers pass away or sell the property and the property is worth less than what is owed. Since these loans are insured by FHA, the lender then makes a claim and the government has to make them whole. FHA collects and has collected Billions of dollars in premiums to cover any possible claims and there have been statistically, almost none to date.
Apparently, someone decided that the claims might exceed the collected premiums because of the recent drop in Real Estate values. The problem is that no one knows when these borrowers will die or where the Real Estate market will be when they do.
Yesterday, the House voted to reduce HECM benefits so that there would be no shortfall. Nobody knows how much of a reduction that will mean or what kind of change in the product that will cause. Let's hope the Senate is a little more prudent.
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Thanks for the update on this. Nothing good can come of the government getting their fingers in the pie. Don't they have actuaries that can tell them probabilities on this stuff? Paranoia is setting in.