Senate Passes Appropriations Bill, Let the Reverse Mortgage Negotiations Begin

Late last week the Senate passed its version of the Department of Transportation Appropriations Act of 2010 (H.R. 3288) by a vote of 73-25.  Since the bills each have their differences, both versions to go a conference committee where House and Senate members iron out the differences and return a compromised version to both the House and Senate for final approval. 

Each of the bills handled HUD’s $798 million subsidy request for the Home Equity Conversion Mortgage (HECM) differently.  We went into more detail on the differences last week, but clearly the most important part of the bill is the principal limits.

Both bills adjust the principal limits for the HECM, but the House bill would do more damage compared to the Senate version which includes $288 million to cover part of HUD’s subsidy request.

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Many question why the government would lower the principal limits during a time when seniors are facing so many hardships.

While most in the industry agree that adjusting the limits on HECMs is a step that HUD needs to take, many feel now is not the time.  The National Reverse Mortgage Lenders Association has suggested that HUD could reduce the upfront mortgage premium on HECMs and increase the annual premium to deal with shortfall.

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  • If there was ever a time to plead our case, now is that time. The window on how much time is left is short. Several have asked who and what to write so to that end the remainder of this comment is dedicated.

    The following Senatorial conferees were announced: Murray (D-WA), Byrd (D-WV), Mikulski (D-MD), Feinstein (D-CA), Johnson (D-SD), Lautenberg (D-NJ), Specter (D-PA), Inouye (D-HI), Bond (R-MO), Shelby (R-AL), Bennett of Utah (R-UT), Hutchison (R-TX), Brownback (R-KS), Alexander (R-TN), Voinovich (R-OH) and Cochran (R-MS).

    It is expected that the House Democratic conferees will be: Obey (WI), Murtha (PA), Dicks (WA), Mollohan (WV), Kaptur (OH), Visclosky (IN), Lowey (NY), Serrano (NY), DeLauro (CT), Moran (VA), Olver (MA), Pastor (AZ), Price (NC), Edwards (TX), Kennedy (RI), Hinchey (NY), Roybal-Allard (CA), Farr (CA), Jackson (IL), Kilpatrick (MI), Boyd (FL), Fattah (PA), Rothman (NJ), Bishop (GA), Berry (AR), Lee (CA), Schiff (CA), Honda (CA), McCollum (MN), Israel (NY), Ryan (OH), Ruppersberger (MD), Chandler (KY), Schultz (FL), Rodriguez (TX), Davis (TN), and Salazar (CO).

    The House Republican conferees are expected to be: Lewis (CA), Young (FL), Rogers (KY), Wolf (VA), Kingston (GA), Frelinghuysen (NJ), Tiahrt (KS), Wamp (TN), Latham (IA), Aderholt (AL), Emerson (MO), Granger (TX), Simpson (ID), Culberson (TX), Kirk (IL), Crenshaw (FL), Rehberg (MT), Carter (TX), Alexander (LA), Calvert (CA), Bonner (AL), LaTourette (OH), and Cole (OK).

    Some have asked what should be in a letter to a lawmaker and how they can be reached. Below are three helpful websites. The third website contains information on how to properly address lawmakers in writing and also how to reach them.

    http://www.restoringeden.org/campaigns/funstuff

    http://www.cbf.org/Document.Doc?id=303

    http://usgovinfo.about.com/od/uscongress/a/lett

    Because of the short period of time to reach lawmakers, sending a fax or email followed up with a letter would be appropriate.

    As to content, two major points should be addressed.

    First, HECM principal limits should not be lowered; instead the subsidy should be funded in full emphasizing that subsidies are estimates and the HECM fund may in fact have sufficient cumulative net profits to offset the expected deficit. Some may want to discuss how putting this burden on seniors is unfair and unreasonable.

    Second, the lending limit of $625,500 should either be made permanent or extended at least through September 30, 2010.

    Please remember, time is of the essence.

  • I'm with you critic, and admire your passion, but I have to be honest as always and state that it is simply too little, too late. The train has left the station….. and they forgot to make sure the seniors were seated properly prior to leaving…..!!!
    Change is inevitable, how you prepare and react is the question!

  • There will be other trains. As the old saying goes “it wouldn't hurt”.
    Seriously, you could influence legislators, especially with testimonial quotes or letters from seniors whose homes have been saved. These legislators know that seniors vote.

  • So not only will the limit be lowered to $417,000 nationwide, but there is also going to be a reduction in principle limit by 5%? Where is NRMLA? How is it that the Gov't can spend hundred's of Billions of dollars bailing out every corporation and bank in this country, but cannot appropriate enough money to help our seniors who helped build and defend our country?

  • NRMLA just came out with a legislative update and outlook that was not positive. There is some thought that there will be no subsidy and the principal limit reduction will be around 10%. There are also preliminary indications that a reduction to principal limits of 10% could result in approximately 21% of HECM borrowers being turned away unless they can pay off the portion of their current liens that the proceeds resulting from the reduced principal limits do not.

    The update states that HUD has initially responded that there will be no transition period for implementation and reduced principal limits must be reflected on all applications taken after September 30, 2009. There was no news on the extension of the national lending limit.

    Locally and regionally a return to a lending limit of $417,000 could be of greater importance than reduced principal limits caused by no subsidy. Such a return would mean that even if the HECM appropriations request is fully subsidized (a highly unlikely event per the recent NMRLA legislative news release), a return of the lending limit to $417,000 will reduce principal limits of homes appraised at $463,500 by over 10% going up to 33.33% on homes appraised at $625,500 or more.

    If the appropriations bill cuts principal limits by 10% and the higher lending limit is not extended, homes appraised at $625,500 or more will see a reduction of the principal limit of 40% starting January 1, 2010. The combination of the HERA origination fee cap, a H.R. 3288 reduction of 10% plus a return of the national lending to $417,000 might not be just decimating but perhaps even devastating to California originators.

    Like others, having read the response of Mr. DeMarkey yesterday to the negative outlook of The Critic, I had hoped Mr. DeMarkey knew something the rest of us did not. As to the subsidy, NRMLA officially seems even more pessimistic than The Critic — a frightening thought.

  • I am so disappointed with our congress. The parents and grandparents who have spent their lives enriching this country and paying into every program are going to be squeezed from every angle, it’s pathetic.

  • With so many new local companies originating these loans without considering the best interests of the borrowers and the new legislation that's limiting the borrowers' benefits, us “Above Board” originators are going to be forced out of the business. That is when the real mess will begin. Let's hope the new counseling protocol will keep that somewhat in check(I have my doubts).

  • With so many new local companies originating these loans without considering the best interests of the borrowers and the new legislation that’s limiting the borrowers’ benefits, us “Above Board” originators are going to be forced out of the business. That is when the real mess will begin. Let’s hope the new counseling protocol will keep that somewhat in check(I have my doubts).

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