FHA Modernization Update For Reverse Mortgages

NRMLA announced that on Friday, the Senate passed yet another housing bill (H.R. 3221) that includes Federal Housing Administration ("FHA") reform; Tax relief for homeowners; $300 billion for a mortgage refinance program to assist borrowers at risk of foreclosure into affordable loans; and Creation of a new regulator to oversee Fannie Mae and Freddie Mac.

The legislation now returns to the House of Representatives as the two bodies attempt to reconcile the differences between their respective housing plans.

NRMLA hasn’t seen the bill language passed by the Senate but it’s their understanding that the portion of the bill that relates directly to FHA Home Equity Conversion Mortgages (HECMs) includes:

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  • Establishing a single, national loan limit equal to $417,000 (The House approved a higher limit for HECMs equal to 132% of the Fannie/Freddie limit, which today amounts to $550,000)
  • Adopting the original compromise with AARP where origination fees would be calculated at 1.5% of maximum claim amount (The House approved a more recent compromise with AARP that utilizes a tiered origination fee structure with a maximum origination fee of $6,000).
  • HECM for Home Ownership
  • HECMs on Co-ops
  • The McCaskill amendment (named for Sen. Claire McCaskill (D-MO) that places restrictions on the sale of other financial products with HECMs and prohibits the required purchase of annuities. (The House approved similar, but less restrictive, language)

We had hoped the Senate was going to vote on the "manager’s amendment" agreed to by the leadership on the Senate Banking, Housing & Urban Affairs Committee, which included the most current compromise with AARP. However, procedural wrangling on the part of some lawmakers prevented the manager’s amendment from being brought to a vote.

What this means is that NRMLA will be working closely with House leaders over the next several weeks to make sure that while the two bills are being reconciled by a "conference" committee, that the final version of the bill includes the higher loan limit for HECMs ($550,000), the most current AARP compromise, and the less restrictive cross-selling language.

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