The Government’s Redesigned Reverse Mortgage Program
The brief’s key findings are:
- Reverse mortgages, which allow retirees to tap their home equity, are insured by the government.
- The financial crisis hurt both the government’s insurance fund and the borrowers.
- Declining home prices led to losses when homes were sold.
- More borrowers defaulted.
- In response, the government has redesigned the program by:
- creating a single loan option with a lower limit and fees;
- limiting initial withdrawals; and
- requiring financial assessments of borrowers.
- These changes should help reduce pressure on the insurance fund and make defaults less likely.