Senate Passes Reverse Mortgage Bill, Grants HUD Authority for Program Change

The Senate Tuesday passed a bill to stabilize the Federal Housing Administration’s reverse mortgage program, pending the president’s signature, the Department of Housing and Urban Development will have the authority it has been seeking to more closely manage the program. 

The house bill, H.R. 2167 was heard on the Senate floor late Tuesday and was passed by unanimous consent. 

The bill, also known as the Reverse Mortgage Stabilization Act of 2013, was introduced by Rep. Denny Heck (D-Wash.) and Rep. Mike Fitzpatrick (R-Penn.) in May. It authorizes the Secretary of Housing and Urban Development to establish additional requirements to improve the fiscal safety and soundness of the HECM program, essentially allowing the HUD secretary to make program changes via mortgagee letter. 

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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.

Representatives of the department have stressed the need for a sensible and calculated approach to making the changes, rather than “blunt” changes that would too strongly limit the program’s use among senior borrowers.

The National Reverse Mortgage Lenders Association has stated its support of the program changes and passage of the bill through the Senate. NRMLA thanked several senators as well as its legislative staff upon the bill’s passage. 

“My deepest thanks to Congressmen Denny Heck and Mike Fitzpatrick, and Senators Bob Menendez and Mike Crapo, for their belief in the value of the HECM program,” said NRMLA President Peter Bell. “We also appreciate that Senators Bob Corker, Pat Toomey, Mark Kirk Jerry Moran and Kirsten Gillibrand and their staffs were willing to engage in dialogue with us and hear our points on this matter.”

The climate in Washington has presented challenges for many lawmaking efforts of late, NMRLA noted. 

“This would not have happened without the fantastic work and perseverance by our NRMLA legislative team, Melody Fennel, David Horne and Scott Olson,” Bell said. “Not much gets enacted by Congress these days. Our team accomplished this against all odds.”

HUD has said it is targeting several program changes in the near term: 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.

Written by Elizabeth Ecker

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    • What in the world is NMLA?

      It is good you can exhale when the House Financial Services Committee has recently passed a GSE and FHA reform bill calling for the elimination of the entire HECM program within two years following enactment.

      If HECM losses continue into fiscal 2014, the elimination provision may gain wind in the next Congress, especially if the Republicans control both chambers of Congress. At that point would the President be willing to forego a general reform act just to stop the elimination of the HECM program? We’ll see.

      • I was wondering about that. I hope RMD keeps us posted on the status of the bill with HECM elimination bill language.

  • Some members of our little industry are spreading myths and nonsense about how HUD might not have gotten the legislation it needs. They excuse it as “worry.” The Act which was passed is H.R. 2167, the legislated name of the Act is the Reverse Mortgage Stabilization Act of 2013.

    The entire preamble and Act itself fits onto one page. You can read it at http://www.gpo.gov/fdsys/pkg/BILLS-113hr2167eh/pdf/BILLS-113hr2167eh.pdf.

    The bill is composed of some sentence structural changes to fit into the current US Code but the body of the bill is an addition to 12 USC 1715z-20(h) and reads as follows:

    “‘‘(3) establish, by notice or mortgagee letter, any additional or alternative requirements that the Secretary, in the Secretary’s discretion, determines are necessary to improve the fiscal safety and sound-ness of the program authorized by this section, which requirements shall take effect upon issuance.’’

    As reported by the Library of Congress, the Senate passed no amendments to the House bill. Notice that at the end of the bill at the Government Printing Office webpage cited above, the following statement is made: “Passed the House of Representatives June 12, 2013.”

    So other than the signature of the President, what additional authority does HUD need to make needed changes? All of the other statements about the contents of the Act outside of what the Act itself plainly states is little more than political posturing.

  • NRMLA just did a great job with this, and I’m sure they’ll address the next issue in time. I think they deserve the congratulations and they know that their work is never over. The next hurdle is much more serious than this one.

    Any guesses as to when the mortgagee letter will be released? Will HUD release a ML soon with an effective date of October 1st? I hope we get some lead time to digest the changes and adjust our methodology.

  • We must take notice of what The_Critic is saying. We can’t sit back and think NRMLA has solved all the problems we face.

    The action taken by the HFSC The_Critic just got through pointing out below:

    “the House Financial Services Committee has recently passed a GSE and FHA reform bill calling for the elimination of the entire HECM program within two years following enactment”.

    This in itself does not give me any comfort I don’t know how the rest of you feel about it?
    Every time we turn around we hear the word “Change”! We can’t live or conduct business with this kind of pressure always looming over our heads.

    I feel The_Critic made some very good points that we need to take seriously.

    John A. Smaldone

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