Reverse mortgage lenders are learning that the Federal Housing Administration (FHA) is moving quickly to implement a reduction in the loan proceeds that seniors can receive from a FHA-insured Home Equity Conversion Mortgage (HECM).

National Reverse Mortgage Lenders Association (NRMLA) president Peter Bell said FHA is expected to issue a mortgagee letter soon — possibly this week — on the HECM cut that could go into effect Oct. 1, the beginning of FHA's fiscal year. The reverse mortgage program faces an estimated $800 million shortfall due to declining house prices and it appears that congressional appropriators are not going to cover this credit subsidy shortfall.

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