Hybrid reverse mortgages could be on the horizon – providing a solid alternative to the fixed rate option that was suspended April 1. HUD dropped the standard fixed reverse mortgage because of unanticipated demands on FHA reserve funds. While boomers prefer the idea of a fixed rate reverse mortgage – the requirement to draw all funds up front to put a strain on the reserve funds given the length of time the full draw is outstanding. Further changes are anticipated over the next few months to ensure the long-term viability of the reserve fund. I had the opportunity to ask Karin Hill , Director, Single-family Program Development, US Department of Housing and Urban Development in Washington D.C., about the possibility of a hybrid program. A hybrid reverse mortgage would allow the initial draw to be a fixed-rate and then remaining available funds left in a credit line that could potentially grow over time and future draws would have a variable interest rate much like a home equity line of credit. Karin commented it would likely be a good option and is under consideration. Work is in progress to try and project the anticipated impact on the reserve fund and other details. No timeline was indicated given that there are a lot of issues her office is working on ahead of the October 1st fiscal year.
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