The number of reverse mortgages that can be insured by the Federal Housing Administration remains in question after a congressional hearing this week.
A House Financial Services Committee markup this week brought the issue to light in discussing a potential amendment introduced by Rep. Michael Fitzpatrick (D-Pa.) that would eliminate the cap currently held on the number of reverse mortgages insured by the Federal Housing Administration. The amendment was withdrawn on Tuesday, leaving the future of the HECM cap still in question after being suspended through the current fiscal year.
When it launched in the late 1980s and early 1990s as a pilot program, the FHA’s reverse mortgage program was capped in the number of loans outstanding that could be insured by FHA.
That number was set first at 2,500 in 1987 and was later raised in 2006 to 275,000—a number now far surpassed by the actual number of FHA-insured reverse mortgages outstanding, according to congressional testimony.
In discussing the amendment, the House Financial Services Committee members voiced the importance of FHA’s reverse mortgage program and a growing need for the products as a result of the current economic struggles Americans today face.
“In the current economic environment the need for financial relief for senior citizens continues to increase,” said Rep. Fitzpatrick. “For many Americans in their later stages of life home equity is their largest single asset. FHA HECM mortgage products give seniors the opportunity to tap the equity in their homes to improve their quality of life without taking on the burden of a monthly mortgage payment.”
Further, Fitzpatrick said, the cap has caused uncertainty in the market for borrowers and lenders of reverse mortgages and should be lifted.
“In essence, under economic conditions in which America’s seniors are experiencing unprecedented deterioration in retirement income and assets any interruption in the HECM program will cause even more harm to the senior community, and I believe it’s time to end the uncertainty and remove the cap that has essentially been ignored at this point for over half a decade,” he said.
The amendment also received support from Rep. Brad Sherman (D-Calif.), who cited the benefit of the reverse mortgage program to FHA.
“Over 730,000 have taken advantage of the program to date, which has generated, as I mentioned, significant revenue and an actual profit to FHA,” said Rep. Sherman of the amendment. “That’s why Congress has always increased the cap or suspended the cap.”
Currently the HECM program is operating under a suspension of the cap through a continuing resolution that expires September 30, 2012.
The congressmen have withdrawn the amendment to allow for more time for the committee to examine the issue, they said.
Written by Elizabeth Ecker