Last week’s article proposed capping cash draws in the early years of a home equity conversion mortgage (HECM) in order to discourage participation by seniors looking for the largest possible cash draw. The purpose of the HECM program is to help senior homeowners finance their retirement, not to deplete all the equity in their homes at the outset of retirement. These cash-out borrowers also impose the largest drains on the FHA’s reserve fund.
The second challenge facing HUD/FHA is to attract more of the seniors for whom the HECM program was intended. There are millions of them whose lives would be enriched with HECMs who haven’t taken them. The reason they haven’t is that they are either unaware of the program’s existence or they are aware of it but their impressions of the program are based on poor information: