WASHINGTON - Fannie Mae will continue to buy reverse mortgages until mid-October, despite HUD's recent announcement that it has run out of money to insure such loans.
In a letter Tuesday, Fannie Mae promised reverse mortgage lenders, the Mortgage Bankers Association, and the National Reverse Mortgage Lenders Association that it will keep buying loans originated under the Home Equity Conversion Mortgage program until Oct. 15.
The short-term viability of HECM loans was called into question last week when the Department of Housing and Urban Development, which had been providing insurance for loans originated under the program, said it would not provide coverage for loans closed after July 26.
To get the program back in business will require passage of a supplemental budget bill or a provision in next year's fiscal budget, which has to be in place by Oct. 1.
Fannie has stepped in to buy uninsured reverse mortgages, with the stipulation that if Congress fails to provide HUD with funding for the loans by Dec. 31, lenders will either have to buy the loans back or compensate Fannie for any losses it may incur.
Frank Pilk, Fannie's senior product manager, said that his company's move was "based on supporting the industry, our lender partners, and seniors." Reverse mortgages are geared to the elderly.