A group of Coalition for Independent Seniors (CIS) board members headed to Washington, D.C. last week, finding themselves in a much better position than they experienced last year. For the first time in two years, the HECM product doesn’t require any additional financial support from lawmakers on Capitol Hill.
“The difference is that we’re not asking for anything, we’re only there to provide education to lawmakers,” said John Mitchell, CEO of Reverse Mortgage USA (formerly known as 1st AA Reverse Mortgage, Inc.).
Faced with significant declines in home values, the Department of Housing and Urban Development asked Congress for HECM program subsidies two years in a row. Unable to obtain the additional funds, the agency was forced to slash principal limits and raise insurance premiums to get the program back to break even. As a result of the program changes, the President’s budget estimates the program will generate $304 million in receipts during FY 2012.
With the product being cash flow positive, Mitchell said representatives on the Hill are now more open to learning about the product, especially with an upcoming budget battle brewing in D.C. During the meetings, Mitchell presented a copy of a report he released earlier this month on how reverse mortgages can help to offset Medicaid spending. “Each of the representatives I met with said that this is something new; part of the solution for medicaid,” he said. “We hope they will embrace reverse mortgages and see the value of them politically.”
Formed in 2010, the CIS is a non-partisan, non-political, public policy coalition dedicated to preserving the opportunity for seniors to stay in their homes and protecting their ability to live financially independent lives. Members include reverse mortgage lenders and other organizations who are committed to helping seniors age in place.
For CIS board members, the trip was another step in the long process of educating members of Congress on the benefits of aging in place and how reverse mortgages can play a role.
“We want to make sure [representatives on the Hill] know how the program works, so if the time did come when the industry needed it, the support would be there,” said Reza Jahangiri, CEO of American Advisors Group.
When asked about the way reverse mortgages can support the government’s increasing entitlement spending, Jahangiri says it’s something that piques Capitol Hill’s interest. “We know [the HECM program] has a positive impact on some entitlement programs, but we haven’t quantified it yet,” he said. However, the message stressed on the Hill was that after changes HUD made to the HECM program, the future of the program looks good.
“The main thing is it’s a program that is sustainable,” said Jahangiri. “Along with HUD, the industry modified the program; it has a positive cash flow in the future.”
More reverse mortgage lenders are scheduled to head to Washington next month for the National Reverse Mortgage Lenders Association’s policy conference on May 10-11.