GAO Outlines Reasons Not to Move the HECM from the MMI Fund

ePath 100K RM leads

Government Accountability Office outlines reasons to keep the HECM in FHA MMI Fund

On its face, the calls the separate the highly-volatile Home Equity Conversion (HECM) from the FHA’s MMI (Mutual Mortgage Insurance Fund) appear fair-minded and pragmatic, but a recent report from the Government Accountability Office cited several reasons why the HECM should stay put. In it’s role as a government watchdog, the GAO is to provide nonpartisan analysis and accountability on how the federal government spends taxpayer dollars.

The GAO’s report entitled “Capital Requirements and Stress Testing Practices Need Strengthening” presents arguments for both moving the HECM to the Special Risk Insurance Fund and to keep it within the MMI fund where it has resided since 2009. In recent months pressure has mounted to move the HECM program from lawmakers and trade groups alike…

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reverse mortgage news

A HECM or a Jumbo?

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Equity consumption, home appreciation, and heirs

HECM-JumboMillion dollar homes are more commonplace than many would expect and with more affluent borrowers considering a reverse mortgage, the question arises: does a reverse mortgage make sense? Jack Guttentag’s (aka The Mortgage Professor) latest column in the Herald Tribune addresses the strategies and risks to consider with high valued properties. Guttentag compare two borrowers aged 62 with homes worth $636,150 (today’s HECM lending limit) and $1 million respectively. If both take the maximum tenure payment of $1,854 per month and remain in their homes until the ripe old age of 100, their loan balances would have ballooned to $2.75 million. This assumes a relatively unchanged interest rate for both borrowers..

However, the pivotal factor in this scenario is the assumed appreciation rate of 4%. With an appreciation rate of 4% the heirs of the lesser valued home would stand to receive about…

Download the video transcript here.