The legislation has been hotly contested as a means to extend payroll tax cuts for two months.

Under the proposed legislation, FHA annual mortgage insurance premiums to could rise by 10 basis points, according to the bill. Guarantee fees, or “G fees” for Fannie Mae and Freddie Mac loans would also rise.

Mortgage Bankers Association President and CEO David Stevens, speaking on behalf of the MBA, urged the House to vote down the payroll tax extension.

“The idea that you should pass a ten year tax increase for two months of payroll tax relief is appalling. Fannie and Freddie’s guarantee fees are supposed to be used to help offset the risk inherent in providing mortgages, and any increases should be used for that purpose,” he said. “Siphoning off a portion of those fees into the general government coffers may be politically expedient, but it is far from sound policy.”

House speaker John Boehner (R-Ohio) told NBC’s “Meet the Press” that the two-month renewal would create additional uncertainty for workers and employers and that Congress should delay its holiday break to ensure that a one-year extension was passed.

“It’s pretty clear that I and our members oppose the Senate bill. It’s only for two months,” he said.

Written by Elizabeth Ecker

“The level of real GDP could be 2.7% less by the year 2015 than would otherwise be the case for the United States,” Stephen Wilson, outgoing chairman of the American Bankers Association, said during a presentation in November. “This could result in 2.9 million fewer jobs being created.”

The statistics collected on the impact the law has had are striking. Dodd-Frank has stacked up, literally, to total almost 20 million hours of paperwork on U.S. businesses, the article states. Of the rules to be implemented under Dodd-Frank, only a fourth have gone into effect thus far.

The Consumer Financial Protection Bureau, which went into effect in July, will encompass the majority of Dodd-Frank’s own hiring and funding. The agency began with a staff of 1,225 and a budget of $330 million, the article states.

Read the Investor’s Business Daily article.

Written by Elizabeth Ecker

The 31st Annual Legislative Session, which adjourned in October, released a list of California’s top ten state legislative proposals that were given priority for enactment into law in 2012. The Reverse Mortgage Transparency Act, AP-32, ranked third on the list.

“The Reverse Mortgage Transparency Act would require reverse mortgages to allow the borrower to determine the consequences of the mortgage based on their personal situation, financial circumstances, health and long-term needs,” reads a summary of the proposal.

A California Senior Legislature spokesperson said that more information on the proposal will be available in January 2012.

The west coast state has recently taken other steps to reform reverse mortgage referral practices. In September, Governor Jerry Brown signed into law a bill that aims to prevent inappropriate conduct by insurance professionals toward seniors with reverse mortgages. The bill is designed to prohibit cross-selling and stop insurance agents from making referrals to anyone who is involved with selling reverse mortgages.

Other top-ten state proposals include a missing persons program to protect those suffering from Alzheimer’s or dementia who may wander away from home; requiring money wire transfer services to be included in the definition of mandatory reporters of suspected financial elder abuse; and increasing the penalty for identity theft of victims aged 65 or older.

The California Senior Legislature is a nonprofit, nonpartisan political organization whose members are elected by California seniors.

Written by Alyssa Gerace

The state’s warm climate, low cost of living, and lack of income tax makes it a particularly favorable location for seniors who are looking to downsize or relocate into a new home, says David Cook, manager of Network Funding, LP’s reverse mortgage division. Added to those factors is a 10% senior citizen population, according to U.S. Census data, making for a ripe market.

“The originators are ready for it, Realtors are ready for it, builders are ready for it, and seniors are ready for it,” says Cook of the HECM for Purchase. “We all think seniors should have this option.”

Cook has given presentations to groups of realtors to promote discussion of the program, in order to get their opinion on the product.

“Without exception, they get very, very excited about the HECM for Purchase,” he says. “When you think of a realtor or a builder that can be educated on the HECM for Purchase, what they see is an opportunity to provide financing for a senior that’s purchasing a property that otherwise they won’t qualify for under the new stringent requirements. There are a lot of seniors that, four years ago, could have bought a home with a traditional mortgage, and today, they can’t. So it gives them an option that they couldn’t otherwise.”

Other Texas lenders agree on the program’s viability.

“I think there’s a huge market for [HECM for Purchase]. If you look at other states, you would see that the HECM for Purchase is a tool that many seniors are utilizing, that is not available in Texas,” says Phillis Jackson, Manager of Athlan Mortgage, a branch of Network Funding, LP.

However, in order to allow the HECM for Purchase program, which gives borrowers the ability to purchase a new home using the proceeds from a reverse mortgage on that property, Texas’ constitution would have to be amended, says Scott Norman, the immediate past president of the Texas Mortgage Brokers Association (MBA).

“Anything that relates to home equity lending in the state of Texas must be authorized by the constitution,” he says, explaining that current law requires a prospective borrower to have equity in a house before obtaining any sort of a lien against it.

In 1997, Texas was the last state to allow reverse mortgages, a change which also required amending the constitution (the HECM for Purchase program had not yet been developed at that time). Since then, it’s become the state with the second-highest endorsement volume, behind California.

“Technically speaking, a reverse mortgage is a refinance—you already own the house. And with a HECM for Purchase, you don’t own the house yet,” said Norman, adding that it’s a classic ‘chicken or the egg’ quandary. “How do you buy a house, by getting a reverse mortgage on it, if you already have to own it, per the constitution?”

The Texas legislature will not meet again until January of 2013, and in the meantime, Norman is heading up the Texas MBA and the National Reverse Mortgage Lenders Association’s (NRMLA) efforts to amend the constitution.

In order to do this, state legislators need to sponsor legislation to change what Norman says amounts to a “technical glitch” in the constitution. He says they’ve spoken to a few who were supportive, but still do not have any lined up.

Written by Alyssa Gerace

Authored by Assemblyman Mike Eng (D-CA), AB 793 is designed to prohibit unscrupulous insurance agents and brokers from participating with, employing, or making referrals to an individual involved in the sale of reverse mortgages with the sole purpose of cross-selling inappropriate products such as annuities.

“AB 793 provides another level of protection for seniors from being persuaded to use the proceeds of a reverse mortgage to purchase inappropriate insurance products, primarily annuities and long-term care insurance that may not be suitable for them,” Eng said in a statement.

The bill had the support of the Dave Jones, the California Insurance Commissioner, who asked the Governor to sign the bill last week.

“There is an increasing need for this bill as the growth of the reverse mortgage business has been accompanied by aggressive marketing and abuse, especially when reverse mortgages are marketed along with insurance products or financial investment vehicles,” said Commissioner Jones. “A reverse mortgage should be an option of last resort only for seniors with an immediate need for cash and have no other means.”

The Commissioner said the bill should stop insurance agents from making referrals to an individual involved in the sale of reverse mortgages.

“This new law will help return the concept of a reverse mortgage to its original form and protect seniors from being sold products they simply don’t need and, in fact, actually harm them financially,” he said.

In total, the bill includes $55.15 billion in discretionary spending – a reduction of $19.8 billion below the President’s request and $217 million below last year’s level.

The funding level in the bill reflects the overall fiscal year 2012 discretionary spending total of $1.043 billion to which the House, Senate, and White House agreed in the recent debt ceiling legislation.

“Step by step, we are trimming government spending and streamlining programs to make them more cost-effective, efficient, and responsive to the American people. This bill saves taxpayers billions of dollars and eliminates waste wherever possible. And it reflects responsible decisions to ensure that the transportation and housing programs Americans rely on can remain in place for years to come without putting our nation even further in debt,” House Appropriations Chairman Hal Rogers said.

Subcommittee Chairman Tom Latham added, “This bill establishes a realistic approach to funding these programs by building on a foundation of fiscal responsibility. The American people rightfully expect leaders to put people before politics and progress before partisanship to change the way Washington works and the work that Washington does to restore the confidence in the American Dream and our economy. We recognize that responsibility with a bill that focuses on a continued commitment to reducing the size, cost, waste and scope of the federal government.”

The $38.1 billion for HUD is $ billion less than last year and $4 billion below President Obama’s request.  In addition, the bill slashes all funding for any new “sustainable,” “livable,” or “green” community development programs.  The majority of the cuts are largely due to administrative and capital reductions, which allows the bill to provide funding to renew every individual and family in the program to ensure no critical benefits are eliminated or cancelled said Republican leaders.

In addition, the bill provides the Federal Housing Administration $400 billion in guarantees for single family loans insured under the Mutual Mortgage Insurance Fund, but fails to include any support for counseling.

“The Republicans continue to refuse to fund Housing Counseling Assistance to low-income renters and home buyers, helping them avoid homelessness, foreclosure, and providing sound advice on reverse mortgages, purchasing a home and avoiding predatory loans,” said Rep. Norm Dicks (D-WA) in a statement.

Rep. Maurice Hinchey (D-NY) submitted a letter requesting the subcommittee restore $88 million in funding for HUD counseling, which was removed as part of the continuing resolution bill passed earlier this year.

“If these critical funding shortfalls were to continue, as of October 1, 2011, housing counseling services across the country will be reduced and staff performing housing counseling will be limited,” said Hinchey in the letter.

The subcommittee markup is scheduled to meet on Thursday to debate the bill.

Update: the bill passed late on Thursday

The testimony, given by Hank Cunningham, chairman of the Residential Board of Governors of the Mortgage Bankers Association, focused on changes mandated under Dodd-Frank and the impact they have on lenders and borrowers.

“Most lenders know we will never be ‘too big to fail,’ but we also wonder if we are ‘too small to comply,’ raising the very real possibility that borrowers may lose our services and the important competition we bring to the market,” he said.

While reverse mortgage loans are not included in the QRM definition, other changes under Dodd-Frank such as the Secure and Fair Enforcement Mortgage Licensing (SAFE) Act requirements and loan originator compensation rules have had a strong impact on the industry.

With regard to the SAFE Act, Cunningham said the MBA has been concerned about a state-by-state approach to licensing resulting in inconsistent requirements and that more can be done to achieve the goals of the legislation.

For loan originator compensation changes, Cunningham urged that Congress should carefully monitor the CFPB‘s implementation of the new rule and insist on a review of its guidance.

“The sheer quantity of rules is placing great stress on lenders, particularly smaller lenders who serve communities throughout the nation every day. Lenders are scaling back the number of production employees as business declines, but are offsetting those cuts with new compliance hires,” Cunningham said. “This kind of trade off is both undesirable and unsustainable.”

View the full testimony.

Written by Elizabeth Ecker

“Unfortunately, the pendulum has shifted too far in favor of driving out risk entirely,” ABA said.

With recent and ongoing regulatory changes in the reverse mortgage industry, some lenders are feeling that same sentiment. At what point has the regulatory pendulum swung too far?

“I think it has begun to cost consumers because the regulations have driven business out of so many companies,” says John Mitchell, owner of Reverse Mortgage USA, of the regulatory impact on the reverse mortgage industry. “The new broker law is a good example. Less competition means higher prices for the consumer.”

The new loan officer compensation law that went into effect in early April caused a frenzy for many lenders and brokers, who slowly made their way through the new rule, and spent countless hours and dollars implementing the changes.

Ultimately, brokers see less competition under the new compensation structure, and many said it was at the borrowers’ expense. Without the ability to receive compensation from the borrower and lender, brokers said seniors ultimately paid more and could borrow less.

“The pendulum has certainly swung too far in the direction of regulation in the reverse mortgage industry,” says Ken Klawans, president of iReverse Home Loans. “While it’s important that safeguards are in place for our protected class of borrowers, throwing more rules, restrictions and papers for the senior to sign does nothing to accomplish the desired results.”

The inception of a Consumer Financial Protection Bureau, mandated under the Dodd-Frank Act, is one example of a mechanism in place that can and will have implications for reverse mortgage regulations. Assuming authority from several government bodies, the CFPB will conduct a report on the reverse mortgage industry by July 21, 2012, and already, before its official launch date, has begun to revamp all mortgage disclosure forms, from a consumer protection standpoint.

“The nature and extent of rules from the Consumer Financial Protection Bureau are unknown, but uncertainty about the potential actions creates potential litigation risk as actions taken today may conflict with the changes in rules devised by the Bureau,” the ABA wrote in its statement.” The expectation of significant new disclosures, for example, translates into less willingness to lend (and therefore less credit extended overall), and higher costs to borrowers that still have access to credit to cover the added risks and expenses assumed by banks.”

Other pending changes such as a potential financial assessment that could come into play for reverse mortgages, as well as loan limits scheduled to expire in October could have an additional impact on the industry. Many agree that regulatory changes under the current administration have been burdensome to implement, and their course can be unpredictable.

“We are already being strangled in often conflicting and ambiguous regulations creating unintended consequences that negatively impact those who the rules were intended to protect.” Klawans says. “Our government’s resources would be better spent educating consumers rather than restricting capitalism.”

Written by Elizabeth Ecker