The clock is ticking down to the 2012 presidential election as Republicans and Democrats battle for control of the White House. Looking at senior-related issues, both candidates’ plans for Medicare are getting a lot of coverage, but another topic that’s also garnering attention is the ability for seniors to age in place.
While reverse mortgages aren’t specifically on either candidate’s platform, they can be a great option for people who want to stay in their homes while either eliminating their monthly mortgage payment, or providing additional cash flow.
However, a Republican or Democratic president may have different priorities when running the country—and by extension, federally-administered programs. That could have a potential impact on you, if you’re thinking about getting a reverse mortgage.
Federally-insured vs. Privately-insured Product
The Home Equity Conversion Mortgage (HECM) program is administered through the U.S. Department of Housing and Urban Development (HUD) and insured by the Federal Housing Administration (FHA). A large majority of reverse mortgages fall under the HECM program.
Both HUD and FHA are government entities that traditionally have enjoyed Democratic support, while Republicans are more likely to favor smaller government and more private market participation.
Republican presidential candidate Mitt Romney has spoken about his plans, if elected, to drastically reduce the role of government-sponsored enterprises Fannie Mae and Freddie Mac in an effort to revive the private market.
During the Great Recession, privately-insured reverse mortgages all but disappeared from the market, and nearly all lenders today are HUD-approved and only originate loans through the HECM program.
If HUD’s monopoly on housing loans is greatly reduced, it could have a huge impact on the reverse mortgage market. This could happen in a couple different ways.
During President Obama’s tenure, the loan limits for HECMs in high-cost areas have been extended multiple times to remain at the current higher limit.
Alternatively, mortgage insurance premiums could be raised to make the market more competitive for private lenders.
Earlier this year, the Obama Administration increased mortgage insurance premiums on “forward” mortgages. It’s possible that either candidate could increase mortgage insurance premiums on all HUD loan programs—including HECMs—to bolster the FHA’s capital reserves for the loans that are being insured.
Reverse mortgages and you
The Republican platform, in general, is based largely on the idea of personal responsibility, and from that perspective, the concept of a reverse mortgage makes sense. Rather than needing to spend down all your assets and transition to the Medicaid program or apply for Supplemental Security Income, getting a reverse mortgage can help you use your own resources and by tapping into your home equity with a reverse mortgage loan.
The Democratic party, on the other hand, is often a proponent of social services and programs for elderly or disadvantaged populations, and a Democratic administration is likely to continue providing support to federally-insured products, including HECMs.
No matter which side of the political aisle you’re on, reverse mortgages are here to stay, especially considering that the HECM program has historically received bipartisan support.
Whether President Obama gets re-elected, or Mitt Romney becomes the next president of the United States, All Reverse Mortgage Company will be here to fill your reverse mortgage needs. Please tell us your thoughts by taking the poll and commenting below!
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- Unintended Consequences of Dodd-Frank Mortgage Reform
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“Which Presidential Candidate is Better for Reverse Mortgages?” By Cliff Auerswald