How HUD Could Rejuvenate The HECM Program

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

Read More