White House opposes VA reverse mortgages - Air Force News | News from Afghanistan & Iraq - Air Force Times

White House opposes VA reverse mortgages

A congressman’s plan to have the Veterans Affairs Department provide reserve mortgages to older veterans is meeting with opposition from the Bush administration.

The proposal, pending before the House Veterans’ Affairs Committee, would duplicate services already available and doesn’t fit into the purpose of the veterans’ home loan guaranty program, which is to help service members and veterans buy homes that could be harder for them to purchase as a result of military service, administration officials said.

At issue is HR 2475, a bill sponsored by Rep. Michael Michaud, D-Maine.

Michaud proposes what are called “home equity conversion mortgages” or reserve mortgages for the VA. Under his plan, veterans age 62 and older could receive monthly payments from the VA that would be based on how much equity they have in their home and how long they would like to receive monthly payments. The payments would have to be repaid, with a fee, when the home is sold either by the veteran or by survivors.

“A home equity conversion mortgage enables older homeowners to convert the equity in their homes into tax-free income without having to sell the home, give up title or take on a new mortgage payment,” Michaud said. “Instead of making monthly payments to a lender, as with a regular mortgage, a home equity conversion mortgage converts the equity in an individual’s home to cash.”

Michaud said there are many reasons why veterans might need the money. “This will enable them to continue to meet the demands of increasing health, housing and sustenance costs, without the risk of losing their home,” he said.

Keith Pedigo, the VA’s loan guaranty service director, said yesterday the Bush administration does not see anything in Michaud’s plan that is not already offered through an existing Federal Housing Administration loan program. In fact, the FHA program may be better, he said, because it fully insures lenders against “all losses” while the VA only guarantees a percentage of a mortgage, generally one-quarter of the full amount.

Pedigo said the VA doesn’t think Michaud’s plan “would be as attractive to the lending community as the existing FHA program.”

He said the proposal also would mark a change for the VA.

“The original intent of the VA home loan program was to provide home ownership opportunities for veterans and active-duty service members,” he said.

The equity conversion program would not help anyone buy a home but rather would help those who already own homes “extract equity” until they dispose of the property.