MBA Speaks to House Financial Services Committee About HECM Program

image Mortgage Bankers Association Chairman Robert Story Jr., testified before the House Financial Services Committee at a hearing on the Federal Housing Administration’s Fiscal Year 2009 actuarial report.

During his testimony, Story said that protecting and improving FHA requires a multifaceted approach which ensures that FHA has the right resources. 

“In support of these goals, we recommend measures such as raising net worth requirements for FHA-approved lenders, reevaluating credit and underwriting standards, reexamining the insurance premium structure and establishing sensible consumer and lender protections for Home Equity Conversion Mortgages,” Story told the committee. “MBA believes these actions will not only help FHA face current market challenges, but also ensure the agency’s future viability.”

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Towards the end of his testimony, Story spoke about the recent changes to FHA’s reverse mortgage program, specifically on the decision to reduce the principal limits:

Although MBA understands the business rationale for this change from a risk perspective, it is critical to note that it is the consumers who are being negatively impacted because they are receiving lower proceeds for the same cost. MBA also objects to the short implementation time for such a significant policy change.

Some of the other choices for addressing the HECM shortfall include Congress appropriating a subsidy, FHA changing the upfront premium, or FHA reducing the HECM loan limit. MBA does not support a reduction in the existing loan limit. We are working with FHA and other industry groups to recommend a long-term solution that would keep the HECM program self-sustaining.

Some of the other choices for addressing the HECM shortfall include Congress appropriating a subsidy, FHA changing the upfront premium, or FHA reducing the HECM loan limit. MBA does not support a reduction in the existing loan limit. We are working with FHA and other industry groups to recommend a long-term solution that would keep the HECM program self-sustaining.

To read a copy of his testimony click here.

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  • Where was the MBA as Congress passed two appropriations bills each of which mandated a reduction in principal limits? While I respect the MBA generally, its understanding of our program and appreciation of the difficulties for FHA in administrating the program are not as strong as would be expected.

    I certainly hope the MBA and NRMLA will be able to find better long-term solutions that Congress will not overrule in future appropriations legislation. With an Administration which seems to ignore the plight of seniors in this current housing crisis, we need our two industry trade associations to work harmoniously in presenting our case to Congress. This last experience shows our program is not in the good graces of Congress as was anticipated by industry leaders when predictions were made that any shortfall would be fully funded by Congress.

    It is hard to believe that the Administration failed to work with Congress to find a way to fund the HECM alleged shortfall. While FHA continues to wholeheartedly support the HECM program, this Administration seems far less inclined.

  • ANY Administration that fails to attend to the financial needs of Seniors will pay a price at the next National Election. Seniors vote and they DO take note of those who recognize their genuine need. Is it too much to ask to enable Seniors to die with dignity in their own homes?

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