HUD Requests a $798 Million Credit Subsidy

Jun 29th, 2009 @ 3:53 PM by Alden Smith

Recently, the Department of Housing and Urban Development (HUD) released its 2010 budget.  In their budget, they asked for a $798 million credit subsidy for the reverse mortgage program that is handled by the FHA.  HUD has never requested a subsidy of any kind.  It begs the question is the Home Equity Conversion Mortgage (HECM) actually working as it should?  In a report by ReverseMortgageDaily.com, the author consulted  the Congressional Justification Report to determine the reasoning behind the request.

According to this report, HUD estimates that 121,000 new mortgage loans will be endorsed in 2010.  In 2009, HUD estimates that this number will be slightly under 120,000.

The reasoning for this plan is this – reverse mortgage guarantee programs are sensitive to future home appreciation.  The FHA is looking for lower house prices in upcoming years.  The FHA has also made considerable improvements in the HECM structure.

The author of the article feels that the most interesting part of the report was that HUD is requesting $15 million for HECM counseling.  This counseling is required by law, and HUD states that funding for this counseling has never been enough.  HUD is also looking for $8 million to train housing counselors.  Currently, there are 7,100 counselors that service approximately 2,600 HUD-approved agencies.

In the current economy, and with all the money pouring out of governmental coffers, it is hard to justify $798 million.  Even though HUD estimates that $30 billion will be generated in reverse mortgages in the fiscal year 2010, HUD requesting this amount of money will only put the taxpayers under increased pressure.  At some point in time, this hemorrhaging of money needs to come to an end.