Reverse Mortgage Lenders to Congress: Loan Cap Presents a Major Issue

A longtime rule limiting the total number of reverse mortgages allowed under law came to the attention of senators last week during testimony presented by the National Reverse Mortgage Lenders Association.

In prepared testimony presented to the Senate Banking Committee, NRMLA President and CEO Peter Bell reviewed the history of the “authorization cap” for reverse mortgages under the Federal Housing Administration’s insurance program.

Currently set at 275,000 loans, the cap has been suspended numerous times under appropriations or continuing resolutions. However, the number of loans outstanding exceeding that cap presents a “major issue,” for reverse mortgage lenders, Bell said.

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“A major issue faced by the reverse mortgage industry is that, while the HECM program was made permanent back in 1998, there has been a statutory limit on the number of loans FHA is authorized to insure,” Bell said in the testimony. “Although the cap has been routinely raised or suspended by Congress in a series of consecutive appropriations measures and continuing resolutions, the existence of the cap deters some industry participants from making the commitment required to fully embrace reverse mortgage lending, thus keeping competition in the market at a minimal level.”

Historically, the cap has been raised from 2,500 loans in 1990 to 25,000 loans by the end of 1995. Subsequent raises of the cap led to its current level, set in 2006 at 275,000. 

The cap must be addressed as one of the program measures being considered by Congress, NRMLA said. 

“NRMLA urges Congress to support the continued availability of Home Equity Conversion Mortgages by permanently removing the cap on the number of HECMs that FHA may insure to minimize any possible disruption in the availability of this importance personal financial management tool,” Bell said. 

Written by Elizabeth Ecker