HUD's absurd decision to cut every Home Equity Conversion Mortgage (HECM, the FHA Insured Reverse Mortgage Program) by 10% accross the board is one of the most insane decisions I have ever seen.
The background here is that the Congressional Budget Office decided a few months ago that, for the first time, the HECM program MAY produce a deficit in 2010 because of the drop in home values, and they asked congress to allocate an additional $800 million to the program. Keep in mind that this is complete conjecture because:
1) No one knows when any of these loans will terminate. (don't tell me about actuarial tables because most HECM's terminate by sale of the property and not death)
2) No one knows what the property values (or the overall Real Estate Market) will be when they terminate.
SO, to make every guessing moron happy, HUD decised to just reduce the loan amounts that people can get by 10% accross the board. This will cause millions of people not to qualify for enough to pay off their existing loans. Keep going and you can see how this will cause more foreclosures, more property value deterioration, etc. The vicious cycle continues.
Also, they gave the industry an entire WEEK to get our loans in process through the FHA system and keep the old loan amounts. Wasn't that generous of them? How about a month or two next time?
To say that I am pissed off is an understatement. This was shameful.
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