Indefinite Alterations in the Future for HECM

By Stevie Duffin Updated on 12/14/2012

By Daniel Duffield

New changes to the Home Equity Conversion Mortgage (HECM) are in the works to facilitate more secure and clear loans for seniors hoping to extract their home equity through reverse mortgages.

Shaun Donovan, Secretary of the U.S. Department of Housing and Urban Development, will introduce these modifications, which aim to create safer lending standards, to the Senate Committee on Banking, Housing and Urban Affairs. The Home Equity Conversion Mortgage is currently the only reverse mortgage program insured by the U.S. Federal Government.

During a hearing for Senate Banking, Senator Bob Corker (R-TN) suggested that the HUD has been unsatisfactory in managing the HECM program, although he did not offer any supporting statistics. Corker insinuated that the HECM program should be made temporarily unavailable for two years in order to get figures back on track. Donovan responded to this suggestion by requesting more authority from Congress to manage these distressed reverse mortgages. Currently, both have agreed to continue this conversation in private.

In the past several years, the private loan market has shifted toward large up-front sums of money in favor of lines of credit. The federal government now aims to shift reverse mortgages toward being a supplemental lifeline by allowing seniors to gain access to equity without having to sell or move from their properties.