Housing Experts: FHA Needs Flexiblity to Fix Reverse Mortgages

Withstanding the deepest recession since the Great Depression is the key cause of the Federal Housing Administration’s reverse mortgage troubles, a panel of policy experts reported before members of the House Financial Services Committee Wednesday. 

But those problems can be solved through current policy decisions as well as upcoming policy changes pending the approval of Congress, they said, stressing  the need for FHA to garner more authority from Congress to make the program changes it needs in order to be sustainable. 

“The reverse mortgage program is unique program for seniors,” said David Stevens, Mortgage Bankers Association president and CEO, and former FHA commissioner. “The only way that program works is if home prices are appreciating or if you keep the draw low enough to compensate for flat home prices.”

Advertisement

The recent changes that have been made under the leadership of Assistant Secretary for Housing Carol Galante are prudent, Stevens said, in curtailing the full draw fixed rate reverse mortgage in exchange for the Saver product. 

“Previously, it allowed too much of a draw,” Stevens said referencing losses projected under the Home Equity Conversion Mortgage program in the most recent actuarial review of FHA’s insurance fund. “That’s what caused this disproportionate outcome.”

The panel was asked by former House Financial Services Committee Chairman Rep. Spencer Bachus (R-Ala.) about the program’s sustainability and whether it should be continued. 

FHA could have addressed problems sooner, had it had the authority and flexibility needed, panelists said. 

“If at the time officials at FHA in the Bush Administration or Obama Administration had been able to swiftly implement the changes they wanted, we would have a positive fund today,” said Sarah Rosen Wartell, president of the Urban Institute. “We need to create the ability for them to act more swiftly. The HECM program is a perfect example.”

In written testimony, Wartell specified a recommended addition to the Fiscal Solvency Act—yet to be passed by Congress—which seeks FHA authority to mange the HECM program by mortgagee letter. 

“This change would enable FHA to better respond to the market by implementing structural changes to programs with immediate effect,” the testimony states. “These changes would eventually be codified through the rulemaking process, and lenders would be able to suggest further modifications through notice and comment periods.”

Written by Elizabeth Ecker

Join the Conversation (1)

see all

This is a professional community. Please use discretion when posting a comment.

  • “If at the time officials at FHA in the Bush Administration or Obama Administration had been able to swiftly implement the changes they wanted, we would have a positive fund today,” said Sarah Rosen Wartell, president of the Urban Institute.

    There is little to no grounds for making that statement. While there are definite grounds to say that the losses could have been mitigated; there are no grounds to conclude that the MMI fund would be positive. Her statement reminds one of the horse track better who claims that if he had just chosen the first number he had thought about, he would have won the pick six for sure. No one can prove or disprove that statement.

string(106) "https://reversemortgagedaily.com/2013/04/10/housing-experts-fha-needs-flexiblity-to-fix-reverse-mortgages/"

Share your opinion