WASHINGTON – February 12, 2015 – (RealEstateRama) — Today at a Financial Services Committee Hearing on The Future of Housing in America with Housing and Urban Development (HUD) Secretary Castro, Congresswoman Carolyn B. Maloney (NY-12) asked Secretary Castro to look into allowing co-op owners to obtain reverse mortgages through the Home Equity Conversion Mortgage (HECM) program which is insured by the Federal Housing Administration, a division of HUD. At present, no private lenders are issuing reverse mortgages to co-op owners. Much of the housing market in New York City is made of co-ops, meaning that many New Yorkers are excluded from the reverse mortgage market.
“Many seniors in my district live in co-ops, and for many their co-op is their most valuable asset. Seniors elsewhere in the country can take out reverse mortgages which enable them to afford to stay in their homes, but seniors who own co-ops have not been able to take advantage of this very important financial arrangement,” said Congresswoman Maloney. “With rising real estate taxes and higher maintenance, it becomes very difficult for seniors on fixed incomes to continue to live in their homes. I hope HUD will take another look at this, and find a way to write regulations so that owners of co-ops, a common real property arrangement in New York City, can obtain reverse mortgages.”
At the hearing, Secretary Castro committed to work with Rep. Maloney on the issue, providing a source of hope for those who once thought co-ops would never be eligible for reverse mortgages.
Reverse mortgages enable homeowners aged 62 and older to withdraw some of the equity in their homes as monthly cash payments, a line of credit or a lump sum disbursement. The amount borrowed, plus interest, insurance and fees, is due only when the owner moves out of the home or dies. The right for housing cooperatives to use reverse mortgages was enacted into law in 2000 in the American Homeownership and Economic Opportunity Act of 2000, Public Law 106-569, but the Department of Housing and Urban Development (HUD) has not issued the guidelines needed to implement the law. In 2008, a provision in the Housing and Economic Recovery Act of 2008 asked HUD to issue regulations so reverse mortgages could be used for co-ops. Before the housing market crash in 2008, reverse mortgages were available to co-ops through some portfolio lenders. In 2011, Maloney circulated a letter that was signed by 8 members of Congress urging HUD to issue the regulations. Last summer, the New York Times reported that HUD had begun drafting regulations but had decided not to put them into effect.