Reverse mortgages are part of HUD's Home Equity Conversion Mortgage (HECM) program. Reverse mortgages are available to homeowners age 62 or older and still living in their home. A reverse mortgage allows older homeowners to take loans from the equity in their homes, using the home's equity as collateral. The loans do not need to be repaid until the borrower dies or the home is sold, at which time the loan becomes due. When this happens, any equity remaining in the property after the repayment of the loan and lender fees goes to the homeowner or their heirs. While reverse mortgages have been criticized for being predatory in nature particularly due to the high rate of foreclosures on reverse mortgages, they are increasingly popular with seniors who have equity in their homes and want to supplement their income.

Under the new HUD rules, borrowers will be not be able to borrow as much money in reverse mortgage transactions. Prior to the rule changes, the maximum loan amount was in the range of 60% to 70% of the property value, with an average loan value of 64%. Observers anticipate that the rule changes will reduce the average loan amount from 64% to 58%. The rule changes tie the maximum loan amount to three criteria:

The new rules will also require borrowers to pay higher upfront insurance premiums. Prior to the rule changes, most borrowers paid insurance premiums of .5% when the loan was made, and 1.25% annually over the life of the loan. Under the new rules, borrowers must now pay an upfront premium of 2% of the property's value and .5% annually over the life of the loan.

Congress is also taking steps to protect reverse mortgage borrowers. California Congresswoman Maxine Waters has introduced House Bill H.R. 4160, entitled the "Preventing Foreclosures on Seniors Act of 2017", aimed at revising the HUD reverse mortgage program to prevent the displacement of elderly homeowners. Key provisions of the bill include:

The bill also requires that the Secretary of Housing and Urban Development consult with the Bureau of Consumer Financial Protection on consumer protection matters.

The HUD rule changes are expected to benefit borrowers by reducing both the loan amounts and the risk of borrowers defaulting on property tax and insurance payments over the life of the loan. Given the current political climate in Washington, commentators are not optimistic that House Bill H.R. 4160 will pass. However, the bill's introduction suggests that future legislation affecting reverse mortgage loans is inevitable.