During a hearing before the Senate Banking Committee Thursday, senators expressed concern over how additional reverse mortgage change will be made, saying they are amenable to helping the Federal Housing Administration to work toward that change. The hearing was called to discuss the role of FHA following its 2012 actuarial review finding the agency in a dire financial position due to losses including those sustained as a result of reverse mortgage insurance.
In dialogue between National Reverse Mortgage Lenders Association President Peter Bell and Senator Bob Corker (R-Tenn.) during the hearing, Sen. Corker posed the question as to whether changes that have been made this year have been enough to sustain the program, and why additional changes can not be made in a timely manner.
Regarding the ability to make changes in a more rapid manner, the senator said he was amenable to supporting the process by granting the authority needed.
“Candidly, I would be very open to doing that,” he said, referencing the authority FHA will need in order to implement additional reverse mortgage changes without having to go through the time-consuming regulatory process, and asking about the timing of the process.
“In the last couple of months, we were able to do away with an entire program—the full draw fixed rate reverse mortgage—by mortgagee letter,” Corker said. “Why can’t we make the other changes in that regard now?”
Rather than to go through rule making to change items in the program regulations, which can take months and even years, the process could be expedited with additional authority, Bell said, noting that some blunt changes can be made by mortgagee letter, but there’s a need for more fine tuning of the program through changes in those regulations.
“I certainly would be willing to look at that,” Corker said.
Further, the senator pressed Bell as to whether the suspension of the full draw-fixed rate loan option was well received.
“It was a good stop gap measure for the time being,” Bell said. “But there is a place for the full draw [fixed rate] loan in a number of circumstances.”
Senator Robert Menendez (D-N.J.) also pressed Bell about the program, indicating that legislation would help alleviate some of the issues the industry is experiencing.
“What would be the effects of not having a HECM program?” he asked, prompting a historical look at the program including a time when the market existed exclusively on the adjustable rate loan option.
“It would be a shame to take the fixed rate option off the table, because it gives peace of mind at a time when people need peace of mind,” Bell said.
Written by Elizabeth Ecker