With Sustainable HECM Program, Industry Finds Different Tone in Washington

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.

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  • Government estimates are just that. There is no cash flow from an estimate. There are too many horror stories about prospectuses which promise to deliver far more than can be reasonably expected. John of all people is more than aware of this problem.

    I am sure if Wells Fargo released the projections it created back in 2006 for its reverse mortgage operations for 2007 and beyond, they would be laughable today. The same holds true for every lender out there including Financial Freedom. Budgets are nothing more than a specific type of financial projection generally applied to cash flow.

    The Medicaid discussion is nothing new. Stephen Moses has been advocating it for years. While politicians are looking for solutions, they also do not want to alienate home owning seniors through placing the burden of increasing Medicaid costs on their backs. While it is a great conversation piece, it is little else.

    As a senior myself, not many of my friends would feel comfortable with a discussion about how reverse mortgages can provide future funding for Medicaid. Most would want to focus on Congressional pay and excesses on Wall Street instead.

  • Cynic,

    What you write is probably true but it felt good for a minute to start my Monday with a positive story about our industry.
    Next time hold off till Tuesday. You have been finding too much time on your hands lately by responding to every story!

    Happy Monday

    • treverse,

      Thanks for the compliment and the admonition.

      I just hate all of the focus senior advocates and others place on the trillions in senior home ownership they covet for getting funds to support their pet projects and more importantly their livelyhood both directly and indirectly.

      By the way, my comment was written on Friday when the RMD article was posted.

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