Florida’s key foreclosure prevention program is dedicating $25 million to help seniors who are in danger of losing their homes after taking out a reverse mortgage.
The plan, named the Elderly Mortgage Assistance Program, is scheduled to begin in August. It is part of the state’s $1 billion Hardest Hit Fund, which is overseen by the Florida Housing Finance Corporation.
Corporation board members approved the $25 million during a meeting last month and expect it to assist a minimum of 1,250 homeowners.
“There are many senior homeowners throughout Florida who have taken out reverse mortgages and have now outlived the payments they were receiving or otherwise fully utilized all of the equity they were due under the terms of the mortgage,” corporation staff members wrote in a proposal.
Reverse mortgages allow seniors to convert their home equity into cash. Instead of paying the bank each month, the senior gets paid, either in a lump sum, a line of credit or monthly payments. Homeowners must be at least 62 to qualify.
The loan is due, with interest, when the borrower dies, moves or sells the house. Because it is a non-recourse loan, the lender cannot seek repayment from any source other than the property.
Homeowners remain responsible for paying the taxes, insurance and community association fees on the property. Falling behind on those expenses can lead to foreclosure.
A report last year from the Consumer Financial Protection Bureau found about 57,600 reverse mortgage borrowers, or 9.4 percent of the nationwide total, were at risk of foreclosure because of unpaid taxes, insurance or fees.
Under the Elderly Mortgage Assistance Program, homeowners could get a maximum of $20,000 to pay those expenses.
Another worry is that borrowers are taking out reverse mortgages at earlier ages. Lori Trawinski of the AARP Public Policy Institute told a congressional subcommittee in June that the average age of borrowers in 2012 was 72, down from 76 in 2000.
“The concern is that by drawing down home equity earlier, people will have no access to additional cash later in life when they may encounter major health problems or other emergencies that require financial resources,” Trawinski told the Senate’s subcommittee on Housing, Transportation, and Community Development.
While details of Florida’s reverse mortgage assistance program are still being developed, eligibility will likely be restricted to U.S. citizens who can prove financial hardship.
Florida has three other programs under the $1 billion Hardest Hit fund to help unemployed or underemployed homeowners by supplementing mortgage payments and paying to have a delinquent mortgage brought current. A program approved in March that will reduce the debt owed on a mortgage is still being developed.
For more information on the Hardest Hit program, call (877) 863-5244, or go to www.flhardesthithelp.org.