Senator Introduces Bill Allowing FHA to Make Reverse Mortgage Change

U.S. Senator Robert Menendez (D-N.J.) introduced a bill yesterday that would allow the Federal Housing Administration (FHA) to implement reforms to its reverse mortgage program.

The long-awaited changes have been a subject under discussion among the industry, Congress members and the FHA, which has been seeking the authority needed from Congress to make the necessary changes.

Coined “The HECM Stabilization Act of 2013,” the bill, S. 469, allows the FHA to implement “much-needed” program reforms. Under the bill, those include reducing the amount of money taken by borrowers at origination to sustainable levels; performing borrower financial assessments to determine if a HECM is affordable; and establishing escrow accounts with lenders to prevent foreclosures from tax and property insurance delinquencies.

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“HUD has made some changes to help keep the program afloat, but their hands are tied,” said Menendez. “I urge my colleagues to pass my bill immediately so HUD can make additional, necessary reforms to keep the program alive, while also reducing taxpayer liabilities by billions of dollars over the coming decade.”

During a hearing last week before the Senate Banking Committee, senators said they were willing to consider granting FHA the authority to make changes to its reverse mortgage program. The introduction of the bill solidifies that commitment.

Congressional authority would enable FHA to expedite its reform process, rather than having to go through rule making to change program regulations, which could take months and even years.

The National Reverse Mortgage Lenders Association (NRMLA) expressed its support of Menendez’s bill.

“We are glad to see Senator Menendez step forward to introduce the bill that gives HUD the authority it needs to manage the program,” said NRMLA President Peter Bell.

The bill has received support from NRMLA as well as senior borrowers represented by the Coalition for Independent Seniors.”Now with a bill articulated, and a tangible piece of legislation, we have a core center of gravity to make it all happen,” says CIS’s West Richards.

Written by Jason Oliva

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  • Since the Library of Congress has not been able to link to the GPO webpage where the bill is located yet, several questions cannot be researched. For example, did the Senator mean to say escrow accounts or did he mean set asides.

    Looking at the Library of Congress website for things other than the text of the bill, there appears to be no Republican co-sponsorship of the bill. This bill is of great concern to the industry. I hope the Senator is serious about seeing it get passed. Because of its timing, one wonders if this is more deflection away from scrutiny on personal matters than deep conviction to see the bill through, i.e., its main purpose is more to rehabilitate the image of the Senator than to put the tools in the hands of FHA it needs to manage HECM risk.

    I hope the Senator gets the due he deserves for introducing the bill but at the same time I hope a strong bipartisan group of Senators co-sponsor the bill very soon. It is important that FHA is seen as actively managing the HECM program from a position of strength and proactivity rather than passive bureaucratic quagmire.

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