The Federal Housing Administration came under scrutiny Tuesday during a hearing before a Senate subcommittee tasked with examining the agency’s financial position and potential insurance fund shortfall due to reverse mortgage losses.
An annual audit of the FHA’s insurance fund projected substantial reverse mortgage losses in late 2012 and the Obama Administration’s Budget proposal found in early 2013 the FHA could require a treasury bailout of $943 million due to its Home Equity Conversion Mortgage program.
While the agency has publicly sought additional authority from Congress to manage the program more closely and implement changes toward its financial stability and safety for borrowers, it is also working on rule making pending that authority that would work toward the same goal, FHA’s Carol Galante told the Subcommittee on Housing, Transportation, and Community Development.
“We are working on guidance today so that if we need to go the rule making process we will try to do it as quickly as we possibly can,” Galante told the subcommittee, stressing the need for “immediate change.”
Among the changes outlined by FHA are moving away from a program that encourages people to take large amount of proceeds upfront and being able to make changes to the principal amount, Galante said, also pointing to the need for a financial assessment of borrowers, set asides for tax and insurance and protections for non-borrowing spouses of reverse mortgage borrowers.
The subcommittee acknowledged the request for more authority, but pressed FHA on what the agency can do within its power currently, seeking a time line for change from Galante.
“We are driving as hard as we can get to get a proposed rule out by July or August,” she said. “We need to get it in place as soon as possible.”
In late May, two members of Congress co-sponsored a bill that would grant the FHA the authority to make reverse mortgage change through mortgagee letter.
Written by Elizabeth Ecker