The Senate Appropriations Committee included $150 million for the Federal Housing Administration’s reverse mortgage program in the US Department of Housing and Urban Development’s FY 2011 budget, matching the amount provided by the House.

Next the bills head to the full House and Senate for vote.  If each passes, House and Senate appropriation conferees will have to reconcile their respective spending bills before each chamber votes again on a final version according to the National Reverse Mortgage Lenders Association.  Both houses are tentatively scheduled to be on vacation from early in of August through September 14.

If Congress fails to reconcile the bills before the new federal fiscal year begins, lawmakers will need to pass a continuing resolution that keeps government agencies funded. “NRMLA continues to work closely with lawmakers to urge that the credit subsidy be kept in the final HUD budget,” said the association in an alert to members.

The appropriation is less than the $250 million the Obama Administration requested in its FY 2011 budget to help offset projected losses for the HECM program, but appropriators feel the $150 million is sufficient to cover expected volume.  Without the subsidy, Commissioner David Stevens said during testimony earlier this year that FHA will be forced to reduce the amount of money available to seniors through the program by 21%.

Jeff Lewis, Chairman of Generation Mortgage and the leader behind the Coalition for Independent Seniors said getting the appropriation in the House and Senate is great news.  ”It’s an indication that we have growing support and awareness, but we have to continue our efforts to educate and bring the policy makers into the fold,” he said.

President Obama signed the the Dodd-Frank Act, the most sweeping financial reform since the Great Depression on Wednesday.

“With this law, we’ll crack down on abusive practices in the mortgage industry,” said the President during the bill signing ceremony.  ”We’ll make sure that contracts are simpler, putting an end to many hidden penalties and fees in complex mortgages so folks know what they’re signing.”  Adding, “the law is designed to make sure that everybody follows the same set of rules, so that firms compete on price and quality, not on tricks and not on traps.”

Wednesday marked the official end of a hard-fought legislative battle, but just the beginning of implementing the new law.  The American Bankers Association argues that it contains a tsunami of new rules and restrictions for traditional banks that had nothing to do with causing the financial crisis in the first place.

“Implementation of this legislation will be challenging for regulators,” said Edward L. Yingling, ABA president and chief executive officer of the ABA.  ”The result will be over 5,000 pages of new regulations on traditional banks and years of uncertainty as to what the massive new rules will mean. The impact of these rules will be very real and will be felt not only by banks, but by consumers, businesses and the broader economy.”

The law creates the Consumer Financial Protection Bureau, which has the independent authority to write and enforce rules for consumer lending in mortgages, credit cards and other financial products.  The Bureau has the authority to issue regulations, orders, or guidance that apply to reverse mortgage products.

The new Bureau is required to conduct a reverse mortgage study to determine any deceptive practices and figure out whether suitability standards are necessary.  It will also determine whether additional safeguards are needed to protect consumers from being sold reverse mortgages to fund inappropriate annuities, investments, and other financial products.

The broad language of the bill makes it very difficult for the industry to anticipate what is coming.  When the new regulations will be implemented isn’t clear, but some estimate it could take as long as 18 months.

“MBA will work to ensure that the new rules are workable for lenders, don’t stifle innovation and do not negatively impact the ability of qualified borrowers to secure mortgage credit,” said Robert Story Jr, Chairman of the Mortgage Bankers Association.  ”We also look forward to helping members of the House and Senate identify issues and fixes for a technical corrections bill.”

The National Reverse Mortgage Lenders Association didn’t respond to our request for comment.

The House Committee on Appropriations passed the FY 2011 Transportation, Housing and Urban Development bill on Tuesday and included $150 million to support the Federal Housing Administration’s reverse mortgage program.

While the Obama Administration requested $250 million to support the HECM program, the appropriations committee provided the $150 million to ”support elderly homeowners and assist them in keeping their homes rather than forcing them to move to expensive assisted living facilities,” said David Obey (D-WI), Chairman of the House Appropriations Committee in a statement.  ”This level of assistance will keep the program running in 2011 at expected volume levels.”

Industry analysts tell RMD the $150 million puts appropriators estimates at roughly 69,000 HECMs during FY 2011.  Without the appropriation, HUD would be forced to drastically reduce principal limits for the second year in a row.

“We must continue our vigilance and make sure it is not taken away when the bill is brought to the floor for a vote in the full House,” said Peter Bell, President of the National Reverse Mortgage Lenders Association in an alert to members.

Others agree that there is still work to be done to ensure both the House and Senate provide support for the HECM program.

“Passage is an indication that we have growing support and awareness,” said Jeff Lewis, Chairman of Generation Mortgage and the leader behind the Coalition for Independent Seniors. ”We have to continue our efforts to educate and bring the policy makers into the fold.”

A reverse mortgage consumer protection bill failed to pass the California Banking and Finance Committee earlier this month.

SB 660 provides that anyone who recommends the purchase of a reverse mortgage owes the borrower a duty of honesty, good faith, and fair dealing.

Sponsored by Senator Lois Wolk, the bill prohibits the “dividing” of the reverse mortgage transaction into separate parts in order to evade application of the requirements.  This includes, but is not limited to “using the proceeds of the reverse mortgage to fund an annuity, insurance, or investment product within one year from origination of the reverse mortgage.”

The National Reverse Mortgage Lenders Association told members it would “continue to monitor the situation in case any attempts are made to revive the bill.”

The U.S. House of Representatives Transportation, Housing and Urban Development, and Related Agencies Appropriations Subcommittee approved the FY 2011 budget and now heads to the full Appropriation Committee.

The subcommittee included a $150 million to support the HECM program during FY 2011 according to the National Reverse Mortgage Lenders Association.  Congressman John W. Olver (D-MA), Chair of the subcommittee said the $150 million “is a funding level sufficient to cover the expected volume for fiscal year 2011.”

The Obama Administration requested $250 million for the HECM program in the FY 2011 budget to offset projected losses for the Federal Housing Administration’s reverse mortgage program, but it’s unlikely the industry will endorse the $30 billion it projected for the upcoming fiscal year.  As of May, FHA reports show that $15.1 billion HECMs have been endorsed during FY 2010, down nearly 30% from the previous year.

FHA is expected to lower principal limits one to five percent depending on the age of the borrower and increase the annual mortgage insurance premium from 0.50% to 1.25% with or without the appropriation.  However, if the appropriation is not provided, FHA will be forced to reduce the amount of money available to seniors through the program by 21% said Commissioner David Stevens during testimony before the THUD subcommittee earlier this year.

The budget now heads to the full House Appropriations Committee and then to the full House.

“NRMLA will be aggressive every step of the way to ensure the $150 million appropriation remains in the final bill by following up with members of the Appropriations Committee to continue building support for HECM,” said the association in an alert to members.