The FHA insures some 90 percent of reverse mortgages purchased from private lenders. It says about 58,000 loans — or nearly ten percent of its reverse mortgages — were in default in 2012. That's up from 2 percent ten years ago.
The FHA says it faces some $2.8 billion in losses from the defaults, which could force it to seek a bailout from the federal government next year.
By halting the fixed rate standard HECM, the FHA said in testimony before Congress late last year that it hopes to prevent more defaults in the future.
"This does limit an option for people thinking about reverse mortgages, but you can understand why the FHA is doing this," Conway explained. "There's some real concern about people spending their cash too soon and defaulting."
Reverse mortgages are often thought of as a financial lifeline for seniors, especially with medical costs rising for an explosion of retiring baby boomers. More info here...
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