The Federal Reserve Board is proposing to base its regulation of high-yield or reverse mortgages on the Department of Housing and Urban Developments pilot home equity conversion mortgage program. In a regulation the agencies Board of Governors approved for publication for comment Nov. 23, the Feds staff said that it wants to model the disclosures mandated for reverse mortgages after the HUD matrix for HECMs, with some exceptions. The new disclosures primarily deal with the potential cost of the transaction.

The Fed proposal states that only a few lenders offer reverse mortgages without government assistance. The Fed says some of these lenders shift the risk of loss on these loans by purchasing from the loan proceeds an annuity that provides payments to the homeowner starting at consummation or after a lengthy period of time, for example, 10 years.

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