This article proposes changes in HUD policies that would support an enhanced HECM that is part of an integrated retirement plan. Such integration will generate the following benefits:
- Larger payments to borrowers that can increase annually and last until death.
- Built-in protection against over-charges by HECM lenders and annuity providers.
- Reduced losses to the mortgage insurance fund.
Larger Payments to Borrowers
The mortality-sharing feature of annuities allows retirees taking a HECM to draw larger amounts over their lifetimes if they combine it properly with an annuity. This would be particularly valuable for house-rich/cash-poor retirees who have negligible financial assets.
Chart 1 applies to a retiree of 65 who owns a $500,000 house but no financial assets. He draws a HECM credit line and uses a portion of it to purchase an annuity on which payments