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.