In support of a Department of Housing and Urban Development effort to receive more authority over reverse mortgages, a bill was introduced last week by two members of Congress that would work to stabilize the Federal Housing Administration’s Home Equity Conversion Mortgage program.
The legislation, H.R. 2167, or the Reverse Mortgage Stabilization Act of 2013, was introduced by Rep. Denny Heck (D-Wash.) and Rep. Mike Fitzpatrick (R-Penn.) who had previously expressed support for the legislation during a House Financial Services subcommittee hearing in early May.
HUD has been seeking the additional authority to manage the program following an audit of FHA’s insurance fund in 2012 and a report to Congress this year indicating the program’s losses could cause FHA to require a Treasury bailout for the first time.
Yet the most recent books of business are performing strongly, HUD has shown, stressing that the additional changes to shore up the program would help greatly both in managing risk to the FHA’s insurance fund as well as increasing protections for reverse mortgage borrowers.
HUD officials have spoken for the change on several occasions before members of Congress, and have outlined the desired changes in reports to Congress to include: limiting the amount of the allowable draw; where appropriate, mandating the use of escrow accounts or a set-aside to ensure continued and timely payment of property charges including taxes and insurance, and; requiring the use of a financial assessment as part of the loan origination process to ensure the appropriateness of HECM products for potential borrowers.
Without the authority, HUD is limited to changes that would have to go through a lengthy rule making process, or would result in blunt force to the program in its current form.
The agency has expressed support of the program both before Congressional representatives and most recently during the National Reverse Mortgage Lenders Association annual western conference in Irvine, Calif. this month.
“We believe this program is extremely important,” HUD’s Office of Single Family Program Development Director Karin Hill told attendees. “The demographics support it. We are very committed to trying to make this work and work right.”
Written by Elizabeth Ecker