An independent audit of the U.S. Department of Housing and Urban Development’s Home Equity Conversion Mortgage initiative — its reverse mortgage program through the Federal Housing Administration — found that the economic value of reverse coverage is negative $2.9 billion, National Mortgage News reported Dec. 17.

Many seniors took out reverse home mortgages during the recession and now are unable to afford property taxes and homeowners insurance — technical defaults that can lead to foreclosure.

HUD reported that 57,500 seniors were in technical default, with 60 percent participating in repayment plans. In fiscal year 2012, HECM servicers conveyed at least 11,000 real-estate owned properties to the FHA, which is more than double the number conveyed in FY 2010.

The FHA announced Dec. 18 that it would eliminate its standard HECM program, which had allowed seniors to draw a large lump sum at closing, ranging from 62 to 77 percent of the property’s appraised value, National Mortgage News reported.

HUD instead will steer seniors toward its HECM Saver product — currently a much less popular product, but one that offers a reduced payout on the fixed-rate standard HECM. The HECM Saver allows seniors to draw 51 to 61 percent of the property’s appraised value. However, instead of offering a lump-sum payout, the Saver serves as a home equity line of credit.

In FY 2012, FHA lenders originated 48,000 standard fixed-rate HECMs and only 3,800 HECM Savers, National Mortgage News reported.