The Strange and Unusual Political Landscape for Reverse Mortgages

In the midst of a hostile political climate in Washington, D.C. those fighting for the reverse mortgage industry continue to be challenged by the gridlock in Congress.

On the heels of a financial crisis that has thrown the entire country into a tailspin, policy makers have not made it easy to get anything done as ideological debates continue to prevent movement on significant issues.

The lack of progress in Congress is also having an effect on smaller issues like the Federal Housing Administration’s Home Equity Conversion Mortgage program.

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Take the budget appropriations process, which holds the fate of funding for mandatory reverse mortgage counseling, for example. On the Senate side, representatives are moving “minibus” bills through the approval process piecemeal, rather than approving a complete bill at once.

Meanwhile, the appropriations process on the House side has been a slow—and somewhat unprecedented process—as both sides of the aisle struggle to compromise.

“As the gears of the legislative branch slowly churn, the restoration of housing counseling funding has suffered to a limited extent,” West Richards, executive director of the Coalition for Independent Seniors (CIS), told RMD prior to the recent Congressional approval of $45 million for housing counseling funds through 2012. The designation of those funds of HECM counseling is pending a HUD decision, which is required to take place within 120 days.

In some cases the traditional steps toward approval have gone by the wayside, in what would has amounted to a strange and unprecedented appropriations process.

It is difficult to follow, even for seasoned pros.

“There was a time when Congress was much more responsive to requests from the administration,” says Peter Bell, president of the National Reverse Mortgage Lenders Association. “It’s very frustrating.”

Perhaps the most sweeping request is the creation of the Consumer Financial Protection Bureau, which was created under the Dodd-Frank Act and has the potential to wield unprecedented power over the financial industry.

Through a series of bills, House Republicans have stated they will not approve a director until the structure of the bureau is changed to wield less power. The bureau now suffers from a political impasse that has essentially blocked any nominee from being voted in as director, leaving it headless and limited in terms of what it can do and whom it can regulate.

“I don’t believe the administration is trying to be obstructionist,” Bell says, “but I do believe there are enough in Congress that are that the administration can’t achieve anything it feels is a priority.”

While Congress continues to squabble over spending and job creation, the Department of Housing and Urban Development is working to tackle its own initiatives, including strengthening the HECM program.

Speaking before attendees of NRMLA’s annual convention in Boston in October, FHA acting commissioner Carol Galante expressed support for the HECM program but stressed that more attention is needed.

“Because it started as a sleepy little pilot program, frankly, it hasn’t had a lot of attention paid to it inside the HUD building,” she said.

Even outside of the HUD building, those advocating for reverse mortgage lenders are working to bring attention to the product and the role it can play in supporting seniors during retirement.

“Once conservative members of Congress realize that HECM is a government backed ‘private enterprise’ solution for an increasingly important public policy challenge, our value proposition takes on a whole new meaning for them,” Richards says.

In the coming years, the number of Americans in the 65+ age demographic will surge to 72 million in 2030, and representing nearly 20 percent of the total U.S. population, according to U.S. Census data.

That average American over 65 is unprepared for retirement, Employee Benefit Research Institute studies show, with more than half having less than $25,000 in savings and investments for retirement, excluding pensions and the value of their homes.

With a significant amount of retirees’ net worths tied up in their homes, advocates say reverse mortgages need to be part of the solution for allowing older Americans to finance their own retirement.

However, making this a reality is difficult as the industry continues to address a familiar age-old problem.

“Our main challenge moving forward is really one of education,” Richards says. “Members of Congress do not fully comprehend how and why the government must remain part of the reverse mortgage equation for it to function at its maximum potential.”

Written by Elizabeth Ecker

This edition of RMD Report is brought to you by Landmark, a leading national appraisal management and compliance company serving the reverse mortgage lending industry.

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  • Perhaps it would be clearer to everyone involved if someone would step forward and explain why $2.2 billion plus in transfers from other MMI fund reserves were needed to endorse just under 260,000 HECMs.  Of course after some manipulations on how value is reported, the value of such HECMs is over $1.3 billion.
     
    Let us say that the value only went up $700 million this fiscal year.  That would be saying it cost HUD about $6,000 per HECM to endorse them.  This program is supposed to be self-sufficient and “a government backed ‘private enterprise’ solution” which it was to a major degree until about forty months ago.  Now things are different, much different.
     
    By some CIS remarks, one wonders who needs education the most, the conservatives in Congress or the members of the CIS.  It would be great if the housing market were different but now even HMBSs are being revalued to something less.
     
    All homeowners need help.  When will this President lead on this issue?  While the President belly aches behind closed doors in other countries, the Great Housing Depression is only getting worse.  When he had a cooperative Congress he failed to initiate any meaningful legislation except to create the CFPB and overbearing regulation (and on second thought Dodd and Frank did that). 

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