House Passes Bill Lowering Reverse Mortgage Benefit, Senate Up Next

The House of Representatives passed HR 3288 late last week by a vote of 255-168, which made appropriations for the Departments of Transportation, HUD, and related agencies for FY 2010.

The bill includes two three provisions for reverse mortgages, one which extends the higher loan limit for FY 2010.

Sec. 235. For mortgages for which the mortgagee issues credit approval for the borrower during fiscal year 2010, the second sentence of section 255(g) of the National Housing Act (12 U.S.C. 1715z-20(g)) shall be considered to require that in no case may the benefits of insurance under such section 255 exceed 150 percent of the maximum dollar amount in effect under the sixth sentence of section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1454(a)(2)).

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The bill also instructs HUD’s secretary to adjust programs (ie HECM) to operate at a net zero subsidy rate:

That for new loans guaranteed pursuant to section 255 of the National Housing Act (12 U.S.C. 1715z-20), the Secretary shall adjust the factors used to calculate the principal limit (as such term is defined in HUD Handbook 4235.1) that were assumed in the President’s Budget Request for 2010 for such loans, as necessary to ensure that the program operates at a net zero subsidy rate:

This would adjust the principal limit calculation for the HECM program, however it’s unclear how much it will change the calculation.

Also, Jim Veale pointed out the following, which will lift the cap on HECMs until at least October 1, 2010:

“SEC. 217. Notwithstanding the limitation in the first sentence of section 255(g) of the National Housing Act (12 U.S.C. 1715z—20(g)), the Secretary of Housing and Urban Development may, until September 30, 2010, insure and enter into commitments to insure mortgages under section 255 of the National Housing Act (12 U.S.C. 1715z—20).”

Earlier today I spoke with Jeff Lewis, Chairman of Generation Mortgage, about the potential changes to the HECM and he said, “We need the industry to motivate the seniors who have been helped by reverse mortgages to make sure their voices are heard on the Hill.”  He added that, “Now is not the time to tinker with a program that helps seniors stay in their homes and live a comfortable life”.

Next the Senate will draft its version of the bill, however if the if the Senate amends any part of it or creates its own bill, differences will have to be resolved and the revised or new bill approved by both the House and the Senate before going to the President for his signature.

Have you contacted your Senator to voice your opinion on changing the HECM program? 

HR 3288

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  • admin,

    There is a third thing this bill does:

    “SEC. 217. Notwithstanding the limitation in the first sentence of section 255(g) of the National Housing Act (12 U.S.C. 1715z—20(g)), the Secretary of Housing and Urban Development may, until September 30, 2010, insure and enter into commitments to insure mortgages under section 255 of the National Housing Act (12 U.S.C. 1715z—20).”

    This means if passed as is, there will be no cap on the number of HECMs that FHA can endorse until at least October 1, 2010.

  • It will be interesting to see if this “sudden call to flurry” will have any positive impact. It takes considerable planning to respond effectively. In fact most readers will not see this article until tomorrow, the first day of the Senate Committee on Appropriations hearings. It could all be over the next day except for the full Senate vote which could also take place that day. H.R. 3288 (the House bill) was introduced last Thursday into committee and passed by the full House the next day; in DC speak – “Whew, that was fast.”

    Even if this “call” does something, will it simply shift a reduction in principal limit factors to an increase in the MIP? While it sounds good to try to do something, this battle was actually lost a long time ago and no matter what ultimately comes of H.R. 3288, the disastrous Obama administration budget revisions could be with us for years.

    It is difficult to understand why those who knew about the intention of the Obama Administration to substitute OMB home appreciation rates for those used in the HUD HECM mathematical model did not speak out months ago. The mistakes of this administration are no different in their consequences than those of prior administrations. But one of the mistakes of this administration has created an irreversible paradigm shift in how HECM budget amounts will be reflected in the HUD budget request unless something is done about it now.

    Just remember this is not your “father’s or grandfather’s” Democratic Party. Not even FDR or JFK had the nerve to support the pointless deficits this administration so perilously promotes. So who can blame the House Democrats (as they deafeningly declared by their votes last Friday) for trying to plug an “unnecessary” HECM deficit on the backs of next fiscal year’s HECM borrowers? Just look at the House vote on H.R. 3288, it is overwhelmingly Democratic.

    Even NRMLA is confused as to who is who; just yesterday Senator Claire McCaskill (D-MO), a very early primary Obama endorser, was declared a Republican. Who can blame the NRMLA author for this apparent Freudian slip over such a HECM detractor?

    What has happened in this fundamental change to the HECM budget process is the end of the justification of this program as a self paying program over its life to one that must justify its relative deficit position, fiscal year by fiscal year. This “call” is simply a horribly late reaction instead of an early proactive preemptive strike.

    Let’s get the budget process changed or we will be doing this every year that it is calculated that the HECM program has a deficit.

    • Good day,

      We need to contact our senators immediately, we need to do this in force. The problem is when this is all said and done, what will we wind up with in this bill, if passed. Our seniors will surly be hurt any way you look at it. Our industry will suffer for many years to come, if we have an industry as we once new it.

      It appears to me, our legislators/administration wants to completely overall the Reverse Mortgage program (HECM). Our politicians think they know how to protect our seniors when in reality they are severely putting them in a worst financial situation that they are in now.

      Jim Veal and the Critic's comments said it all. I don't think it could be put any better. As I said, we need to take action, contact your senators, have your senior clients cont them as well, it their fight also. We have to rely heavily on AARP and NRMLA but we can't sit back and say, let them take care of it, what can we do. Wrong, we can do a lot, I know I am!

      Thanks,

      John A. Smaldone

  • Am I missing something, or does this legislation effectively flush away the HECM program as we have known it? I'm sure AARP stands pleased; but one must ask why NRMLA is M.I.A.? Well, the true friends of NRMLA are the banks selling HECM's- in the near future, after all the individual originators and small brokers have made their exit, the only place to obtain the Super(down)Sized HECM will be with a clerk at the bank. RIP HECM, you coulda been a contender…

  • Hey 4bees,

    AARP fights for seniors no matter who it hurts even if it means the thing they are trying to save is lost (yes, it is as crazy as it sounds). For example, during the legislative fights over the modernization of HUD which culminated into HERA, AARP fought hard to get our origination fees much lower than they are right now even if that meant few if any banks would do HECMs.

    AARP is fighting hard to remove the provision requiring the reduction of the principal limits. It is on the right side of this fight and they will probably be in it until the bitter end. AARP is fighting for a subsidy rather than sitting passively and watching the principal limits being reduced.

    Since AARP is taking the lead in this fight, NRMLA is in the supportive role. If they lose, seniors will suffer and in most cases we will not be able to help the very ones who need HECMs the most. If HR 3288 is enacted “as is”, that will be a sad day in HECM history.

    • Good day,

      We need to contact our senators immediately, we need to do this in force. The problem is when this is all said and done, what will we wind up with in this bill, if passed. Our seniors will surly be hurt any way you look at it. Our industry will suffer for many years to come, if we have an industry as we once new it.

      It appears to me, our legislators/administration wants to completely overall the Reverse Mortgage program (HECM). Our politicians think they know how to protect our seniors when in reality they are severely putting them in a worst financial situation that they are in now.

      Jim Veal and the Critic's comments said it all. I don't think it could be put any better. As I said, we need to take action, contact your senators, have your senior clients cont them as well, it their fight also. We have to rely heavily on AARP and NRMLA but we can't sit back and say, let them take care of it, what can we do. Wrong, we can do a lot, I know I am!

      Thanks,

      John A. Smaldone

  • This is just going to leave a lot of seniors out in the cold and drown in a sea of so called self government protection, so they can all slap themselves on the back and say LOOK we saved HUD some money we did not have to go to the handout trough.

    And at the same time our seniors are suffering. If these politicians are so gung ho on over protecting seniors like we do small children, why don’t they create a senior citizens reservation were they can all live and the politicians can make all the decisions for them and AARP is the only supplier of financial products.

    My point is this, as we all know the protections are already there, the limits work, the margins are ok, and so what’s wrong? The ethical originators will always make the right decision for the senior and seniors do need to be protected but this is just going too far.

    If the politicians really wanted to protect seniors they would have free health care, cheap prescription drugs and they won’t loose their home due to financial hardship or illness. NOW THAT’S PROTECTION.

  • Good day,

    We need to contact our senators immediately, we need to do this in force. The problem is when this is all said and done, what will we wind up with in this bill, if passed. Our seniors will surly be hurt any way you look at it. Our industry will suffer for many years to come, if we have an industry as we once new it.

    It appears to me, our legislators/administration wants to completely overall the Reverse Mortgage program (HECM). Our politicians think they know how to protect our seniors when in reality they are severely putting them in a worst financial situation that they are in now.

    Jim Veal and the Critic's comments said it all. I don't think it could be put any better. As I said, we need to take action, contact your senators, have your senior clients cont them as well, it their fight also. We have to rely heavily on AARP and NRMLA but we can't sit back and say, let them take care of it, what can we do. Wrong, we can do a lot, I know I am!

    Thanks,

    John A. Smaldone

  • Are the “subsidies” really a return of MIP premiums that were diverted to other uses? I know that at one point Barney Frank was interested in funding affordable housing with “excess” HECM MIP premiums. I don't mean to sound cynical, I'd just like a little detail on the insurance reserve accounting. If MIP premiums aren't adequate to cover losses in this environment then the program needs to be adjusted to survive. And before anyone jumps to any conclusions we need to see what those adjustments are.

  • Hey James_E_Veale_CPA_MBT

    Are you a paid spokes person for AARP?

    They do for themselfs first and maybe help the seniors. Just look what they do with the insurance programs they sponsor. They get paid when a senior buys products that they sponsor and it is pure profit. If our seniors shop around they can get better services and pricing and not get it from AARP.

    • Just the opposite. At the NRMLA National Convention in LA, Mr. Bell asked us if we were so opposed to the positions of AARP what were doing about it. He strongly admonished us to join organizations like AARP and work for change from the inside. I now do volunteer tax work for seniors through AARP.

      I support what little I can and oppose the rest. I think it would be good if more of us volunteered through AARP and voiced our opinions from within.

  • Reality check:

    1) The sole focus of the current administration is to be re-elected Nov. 4, 2012.

    2) The collective seniors that would benefit from a robust HECM are largely not the constituency of Obummer.

    3) Tomorrow, we'll see for sure how thoroughly the fate is sealed for the HECM.

    4) Finally, even now the HECM is but a shadow of what it was 6 months ago.
    HR 3288 is merely the final nail.

    • 4bees,

      This would hardly be a final knock out blow to the HECM program. It is more chipping away. It will hurt and could cut deep enough that we all feel it. Live pricing had little impact on fixed rate HECMs. No HECM will be immune from principal limit factor reductions.

  • Opentopositvechange

    My reading of Mr. Veale's remarks show he is a pragmatist and not any friend of AARP. Remember history, sometimes an enemy of mine is a (temporary friend) as in Russia and the U.S. during WWII, but not afterward.
    Per Mr. Smaldone's suggestion, I am off to email my Senators, it's never too late for the next battle.

  • OpentopositvechangernrnMy reading of Mr. Veale’s remarks show he is a pragmatist and not any friend of AARP. Remember history, sometimes an enemy of mine is a (temporary friend) as in Russia and the U.S. during WWII, but not afterward. rnPer Mr. Smaldone’s suggestion, I am off to email my Senators, it’s never too late for the next battle.

  • Just the opposite. At the NRMLA National Convention in LA, Mr. Bell asked us if we were so opposed to the positions of AARP what were doing about it. He strongly admonished us to join organizations like AARP and work for change from the inside. I now do volunteer tax work for seniors through AARP.rnrnI support what little I can and oppose the rest. I think it would be good if more of us volunteered through AARP and voiced our opinions from within.

  • 4bees,rnrnThis would hardly be a final knock out blow to the HECM program. It is more chipping away. It will hurt and could cut deep enough that we all feel it. Live pricing had little impact on fixed rate HECMs. No HECM will be immune from principal limit factor reductions.

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