Reverse mortgages give seniors some options to access the equity in their homes, if it is a co-0p that they own with equity, they shouldn’t count on the availability of this option. This NY Times article explains the reason HUD is reluctant to expand this program to co-ops.
A long-awaited regulatory change that would open up the federal government’s reverse mortgage program to co-ops is unlikely to happen, presenting a problem for older New Yorkers.
“There is a huge class of older owners who have enormous equity in their apartments who would like to use some of that” for medical bills, building maintenance and other expenses, said Arthur I. Weinstein, a Manhattan lawyer and a vice president of the Council of New York Cooperatives and Condominiums, which represents about 2,300 co-ops and condos.
Single-family homes, multifamilies with up to four units, condominiums approved by HUD and manufactured homes that meet F.H.A. standards are eligible for these loans, known as HECMs. Co-ops are not.
Co-op advocates had expected that to change, however, largely because of a provision in the Housing and Economic Recovery Act of 2008 that permitted HECMs to be used for co-ops. HUD was charged with writing regulations to extend the program.
But Mary Ann Rothman, the executive director of the Council of New York Cooperatives and Condominiums, said her organization learned that HUD began drafting regulations a few years ago and then ultimately decided not to put them into effect, “which is terribly, terribly distressing to us.”
Ms. Rothman says she frequently hears from co-op shareholders eager to tap into their equity; they tend to check in with her repeatedly to find out whether regulations are forthcoming.
“Eventually, I don’t hear from them again,” she said, “and you just know they had to sell the apartment where they would have most loved to stay on.”
A HUD spokesman confirmed that the agency had studied expanding HECM to include co-ops, but decided against it because “F.H.A.’s single-family programs are based on loans being secured by real property and the co-op structure does not meet this basic requirement.”
Co-ops are owned by a corporation and run by a board; residents own shares, rather than property. And because most co-ops are in the New York area, HUD anticipated that loan volume would be small.
Ms. Rothman said that through her affiliation with the National Association of Housing Cooperatives, she has been urging members nationwide — including those in Chicago, Florida and California, where there are concentrations of co-ops — to contact HUD about their own support for reverse mortgages. “We do everything we can to stress the diversity of places where housing co-ops are located,” she said.
Mr. Weinstein noted that before the housing crash, reverse mortgages were available to co-ops through some portfolio lenders (outside the F.H.A. program).
These proprietary loans are largely unavailable, but Peter Bell, the president and chief executive of the National Reverse Mortgage Lenders Association, says he thinks the situation may change in a year or so. Lenders are now beginning to return to the reverse mortgage market, he said, “and my guess is the New York co-op market will be a very attractive opportunity.”