U.S. House Lifts Reverse Mortgage Cap For FHA Loans

The U.S. House of Representatives voted Tuesday to waive the existing cap on the number of reverse mortgages a federal housing agency may insure for older Americans who want to turn home equity into cash.

The Federal Housing Administration (FHA), which insures many such mortgages, is in danger of hitting the 275,000 ceiling on the number of such FHA loan transactions that it can handle.

Tuesday’s legislation, if passed by the U.S. Senate, would remove the limit and allow the federal agency to continue underwriting reverse mortgages.

Under the terms of reverse mortgages, a homeowner borrows against his or her own equity and receives regular monthly payments from a mortgage lender, but retains title to the home.

The reverse mortgage is a popular tool for elderly Americans to utilize their home equity late in life. Tuesday’s legislation passed the House unanimously and now goes to the Senate.

Rep. Jim Matheson, Democrat of Utah, sponsored the bill.

“This program was created to serve out seniors who may be ‘cash poor’ but equity rich,’” Matheson said in a statement. “The majority of the mortgage loan recipients are elderly widows, who may use the money on health care, medicine, home repairs, or other needs.”

Matheson, who sponsored legislation raising the reverse mortgage limit in a past year, said that he and other lawmakers expect to permanently remove the cap in new legislation soon.