Congress Set to Debate Reverse Mortgage Appropriation, Industry Watching Closely

When the The Transportation, Housing and Urban Development, and Related Agencies Appropriations Subcommittee meet on Thursday in the U.S. House of Representatives to deliberate the budget for HUD, the reverse mortgage industry will be paying close attention.

Included in the Obama Administration’s FY 2011 budget is a $250 million appropriation request to offset projected losses for the Federal Housing Administration’s reverse mortgage program.  The request is in addition to lowering the principal limits one to five percent depending on the age of the borrower and increasing the annual mortgage insurance premium from 0.50% to 1.25%.

If congress does not provide the $250 million, FHA will be forced to reduce the amount of money available to seniors through the program by 21% according to testimony from Commissioner David Stevens earlier this year.  During the testimony, Stevens urged members of Congress to provide the appropriation because seniors have been hit hard during the financial crisis due to increasing medical costs and less savings in various types of pension funds and retirement accounts.  “The need for this type of program is greater now than it’s ever been,” he said.

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Whether or not the Congress will provide the appropriation is unclear, but the industry has been working with members of the Appropriations Subcommittee to rally support for the program.

“We have been working feverishly with members of Congress and staffers from both sides of the aisle to build the case for funding the credit subsidy requested by President Obama for the HECM program,” said Peter Bell, President of the National Reverse Mortgage Lenders Association in and email to RMD.  “We have also collaborated with AARP and other key advocacy organizations who are supporting both the funding and amendments giving HUD more flexibility in setting MIPs.”

If the appropriation is not provided, HUD has engineered a new two product solution that could reduce (possibly eliminate) the need for the $250 million.  During a policy conference earlier this month, Colin Cushman, Director of Portfolio Analysis at HUD, outlined the possibility of offering borrowers a HECM similar to the one currently available in the marketplace and a HECM Lite.  The Lite product would provide borrowers less money but would have lower costs than the traditional HECM.

FHA is currently working with the Office of Management and Budget to evaluate the two product solution but if rolling out the new changes isn’t possible by the start of the fiscal year, “a bridge appropriation, heightened premiums, and or reduced principal limit factors may be required to operate the HECM program,” said Cushman.

The last principal limit reductions have had a big impact on the industry and the number of seniors who have access to the product.  As of May 2010, reverse mortgage volume is down 39% from the same period last year according to Reverse Market Insight.  Another steep principal limit reduction will no doubt hurt production even more.

After the House Subcommittee markup, the bill then goes to the Full Committee markup, then Rules Committee and finally the House floor for vote.  The process is repeated all over again in the Senate said NRMLA.

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  • Scary that our fate is in the hands of the government – especially with everything going on. I know they have been all along but if we don't get what we need the HECM will be virtually dead.

  • How do we keep tract of everything this administration is coming up with?

    The principle limit MUST be left alone, this will virtually destroy the HECM's purpose for our seniors.

    The “Lite” program will fit a certain nitch but not help the senior like the original intent of the reverse mortgage was meant for. They talk of a 21% reduction in the principle limit if the budget request is not made. The HECM program would be over, other than maybe the “Lite” program. If the budget request is granted, still another reduction in principle limit factors of 1 to 5 %. How can they actually justify this reduction? I would like my friend James Veale to come into this conversation.

    The reverse mortgage has been a program with the least amount of risk and the least amount claims filed. Yes, they are looking at future actuary tables and loans that come due? I guess our Federal Government and agencies do not have any confidence that home values will ever rebound? This could very well be another benefit our government will take from our seniors. Not only what this will do to the senior but all of us in this industry that will be on the unemployment lines.

    Government control is government destruction of our great nation. We have a lot to celebrate for this 4th of July weekend but could it be the last celebration of our independence and freedom? Every one have a safe and happy 4th of July weekend.

    John A. Smaldone

    • John,

      Unlike last year, (as reported by NRMLA earlier today) the House Appropriations Subcommittee overseeing the HECM program is actually recommending a $150 million subsidy and is questioning the underlying projected data used in the OMB projections reasoning that $150 million should be all that is needed based on current volume trends. What is not clear in the NRMLA update is if the subcommittee considers the $150 million subsidy sufficient to avoid the increase to the ongoing MIP from 0.5% to 1.25%.

      Late last July the House did not give the HECM program any subsidy in their version of HR 3288 but then in mid September the Senate passed their version of HR 3288 which included $288 million in subsidy for the HEMC program. The problem remains; these two bills have yet to be reconciled.

      So while it is very encouraging to read that it is this subcommittee which is the first to step up to the plate, offer $150 million, and question the OMB projection, there is much work ahead. The subcommittee must report its findings, the House accept it, and then pass the bill. Then comes the Senate. Then no doubt there will be need for reconciliation since this one bill deals with the budgets of two departments and related agencies. Then both bodies must pass the final bill so that it can go on to the President where it is expected to be signed into law.

      This being an election year, no one is really sure if we will see a reconciled bill signed by the President by October 1. The appropriations bill for this fiscal year (as stated before) is still pending and unlikely to ever be reconciled.

      It is not too late to work with those in Congress to see this through. Hopefully election year politics will not interfere with the ultimate enactment of this bill.

      Thanks to NRMLA for the update.

  • How do we keep tract of everything this administration is coming up with?rnrnThe principle limit MUST be left alone, this will virtually destroy the HECM’s purpose for our seniors.rnrnThe “Lite” program will fit a certain nitch but not help the senior like the original intent of the reverse mortgage was meant for. They talk of a 21% reduction in the principle limit if the budget request is not made. The HECM program would be over, other than maybe the “Lite” program. If the budget request is granted, still another reduction in principle limit factors of 1 to 5 %. How can they actually justify this reduction? I would like my friend James Veale to come into this conversation.rnrnThe reverse mortgage has been a program with the least amount of risk and the least amount claims filed. Yes, they are looking at future actuary tables and loans that come due? I guess our Federal Government and agencies do not have any confidence that home values will ever rebound? This could very well be another benefit our government will take from our seniors. Not only what this will do to the senior but all of us in this industry that will be on the unemployment lines.rnrnGovernment control is government destruction of our great nation. We have a lot to celebrate for this 4th of July weekend but could it be the last celebration of our independence and freedom? Every one have a safe and happy 4th of July weekend.rnrnJohn A. Smaldonernrn

  • John,

    Unlike last year, the House Appropriations Subcommittee overseeing the HECM program is actually recommending a $150 million subsidy and is questioning the underlying projected data used in the OMB projections reasoning that $150 million should be all that is needed (as reported by NRMLA earlier today). What is not clear in the NRMLA update is if the subcommittee considers the $150 million subsidy sufficient to avoid the increase to the ongoing MIP from 0.5% to 1.25%.

    Late last July the House did not give the HECM program any subsidy in their version of HR 3288 but then in mid September the Senate passed their version of HR 3288 which included $288 million in subsidy for the HEMC program. The problem then still remains; these two bills have yet to be reconciled and it is doubtful they ever will be.

    So while it is very encouraging to read that it is this subcommittee which is the first to step up to the plate, offer $150 million, and question the OMB projection, there is much work ahead. The subcommittee must report its findings, the House accept it, and then pass the bill. Then comes the Senate. Then no doubt there will be need for reconciliation since this one bill deals with the budgets of two departments and related agencies. Then both bodies must pass the final bill so that it can go on to the President where it is expected to be signed into law.

    This being an election year, no one is really sure if we will see a reconciled bill signed by the President by October 1. The appropriations bill for this fiscal year (as stated before) is still pending and unlikely to ever be reconciled.

    It is not too late to work with those in Congress to see this through. Hopefully election year politics will not interfere with the ultimate enactment of this bill.

    Thanks to NRMLA for the update.

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