David H. Stevens, Assistant Secretary of Housing for the Federal Housing Administration testified to Congress that the Reverse Mortgage program is important "The need for this type of program is greater now than it's ever been, due to increasing medical costs, declining employment/incomes, and less "savings" in various types of pension funds/retirement accounts," said Stevens.
However, he then said that limits (loan amounts) need to be cut further, even if Congress appropriates $250 million dollars to the program.
A few important details; the government insured Reverse Mortgage program has been around since 1989, even though nobody paid much attention to it until 2002. Since then it has NEVER needed one penny, it was always self-sufficient, by collecting insurance premiums on every loan at closing and every month to cover the possible shortfall of the loan terminating (due to the death of the last borrower or the sale of the property) with a higher balance than the property is worth.
Now, some guys at the Congressional Budget Office, have decided that since Real estate values have dropped, the program might run it's first loss in 2010.
Pardon me, but that is RIDICULOUS! No one knows when any of these loans will terminate and certainly no one knows where the real estate market will be when they do. This is all based on complete conjecture! Ther is just not enough data to accurately predict how long these loans will last.
Loan amounts got cut by 10% across the baord last year and it looks like the people that need help from Reverse Mortgages are going to have a tougher time getting it if another round of cuts go into place.
