The government-sponsored loan that’s ignored

Last week we reported a Consumer Financial Protection Bureau data release finds nearly one million older homeowners are facing potential foreclosure and eviction. The following week the Secretary of HUD sat with the CEO of AARP to discuss seniors aging in place, and senior housing security.

The CFPB report begins with this paragraph. “Since April 2020, the Census Bureau has tracked the number and characteristics of homeowners struggling to make their mortgage payments. As of July 2021, an estimated 682,400 older adults, defined as adults age 65 and older, were behind on their mortgage payments.” Not to be hyperbolic but it’s quite alarming to learn that mortgage delinquencies and homeowners with zero confidence they’ll be able to make next month’s mortgage payment account for nearly 1 million seniors. Such news is not only distressing but should spur the pursuit of all possible foreclosure prevention options.

Surprisingly the CFPB’s report does not mention reverse mortgages a single time.

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Last week AARP published a video interview between HUD Secretary Marcia Fudge and AARP CEO Jo Ann Jenkins. The interview took place at Victory Heights, a HUD-funded affordable senior apartment in Washington, DC. Quite frankly the facility is beautiful and spacious, a facility most adult children would find suitable for family members over 62 with a limited income.

A variety of topics were discussed in the 12-minute interview ranging from aging in place, reducing barriers for families to build accessory building units for older family members, and homelessness. Each is a worthy topic of discussion but with one notable exception. Reverse mortgages or the federally insured Home Equity Conversion Mortgage were not mentioned once.

While the impressive Victory Heights apartments have 75 one-bedroom units, how do we meet the needs of thousands or tens of thousands of homeowners 65 and older who may not meet the income qualifications to qualify for HUD Section 202 rent subsidies in their town? It’s a sincere question that warrants examination especially since a majority of older homeowners have expressed their desire to remain in their home and age in place.

Call it the reverse mortgage paradox. An FHA-supervised, government-sponsored loan that could help thousands of at-risk senior homeowners is largely ignored or when mentioned is coupled with admonishments to exercise caution.

Yes, when you’re a hammer everything may look like a nail. However, too often the means for older homeowners to construct a more secure retirement are disregarded. That said, HUD’s mission is a noble one and is generally effective in helping millions of Americans avoid homelessness or provide a better quality of life. For that, they should be commended.

However, one potential solution is hiding in plain sight. A means to prevent unnecessary foreclosures, a lower standard of living, and financial angst in retirement. Certainly, lenders and originators are reaching eligible households however an occasional reference to reverse mortgages by our federal housing agencies as one of several possible solutions would expand public awareness considerably.

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