Calif. Congressman Urges Reverse Mortgage Reforms in New Report

A California congressman has released a report on reverse mortgages urging the Federal Housing Administration to implement program reform measures meant to protect taxpayers and consumers.

The report, released by Rep. Mark Takano (D-CA), points to reverse mortgage findings, namely that “reverse mortgages are bad for seniors,” that lenders need to be more responsible, that the program has taken a toll on the federal government and taxpayer dollars and the Inland Empire area of California where Takano’s district is based. 

Takano released the report in conjunction with the Fair Housing Council Annual 2014 Housing Conference in Riverside, California on Thursday. He also submitted a letter to FHA Commissioner Carol Galante urging additional program reforms. 

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“Reverse mortgages were always meant to be a last resort for seniors, but since the Great Recession, we’ve seen an incredible surge in the number of these type of loans being issued,” said Takano in a press release. “Unfortunately, we’ve also seen a lot of misinformation and bad actors flood the market that are not doing what is best for our nation’s seniors, but rather exploiting and profiting off of them. With many Americans being taken advantage of every year, I’m calling on the Federal Housing Administration for the best ways to enact reforms that will save taxpayers money, protect hundreds of thousands of consumers, and save countless homes.”

Takano recommends requiring brokers and originators to exercise their fiduciary responsibility to act only on the best interest of borrowers, limiting the FHA for backing lenders with high default rates, restoring housing counseling funding and extending the “free look” period to allow borrowers more time to determine if a reverse mortgage is right. 

In his letter to FHA, Rep. Takano notes recent reform measures taken to shore up the reverse mortgage program, but asks FHA to consider more. 

“In light of the passage of the Reverse Mortgage Stabilization Act, I would appreciate clarification about the FHA’s authority to further reform the HECM program,” he writes. “Does the FHA have the authority to pursue reforms that would limit its support for irresponsible lenders, or would it take legislative action to change the way that the FHA insure HECMs?”

Reverse mortgage industry leadership responded to the report with surprise, with National Reverse Mortgage Lenders Association President and CEO Peter Bell telling local publication the Press-Enterprise: “I’ve been dealing with housing matters for 37 years now, and I’ve never heard of him. He’s not on any of the committees that deal with this, so I’m somewhat surprised by the whole thing.”

View the report

Written by Elizabeth Ecker

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  • I am sure Peter (and Marty) Bell is surprised finding out that another Democrat is dumping on the HECM program. This is a good reminder that it was not a Democrat that signed the HECM program into law.

    This Democrat has no idea what the HECM program was created to do. He is about as lost as our own originators who declare that the program was put in place so that seniors can age in place.

    I doubt if the Congressman has ever read HUD HECM Handbook 4235.1, Section 1-2 which states: “1-2 PURPOSE OF THE PROGRAM. The program insures what are commonly referred to as reverse mortgages, and is designed to enable elderly homeowners to convert the equity in their homes to monthly streams of income and/or lines of credit.”

    It is clear the Congressman has never read the legal purpose of the program which is found in 12 USC 1715z-20 (a) which states:

    “(a) Purpose

    The purpose of this section is to authorize the Secretary to carry out a program of mortgage insurance designed—

    (1) to meet the special needs of elderly homeowners by reducing the effect of the economic hardship caused by the increasing costs of meeting health, housing, and subsistence needs at a time of reduced income, through the insurance of home equity conversion mortgages to permit the conversion of a portion of accumulated home equity into liquid assets; and

    (2) to encourage and increase the involvement of mortgagees and participants in the mortgage markets in the making and servicing of home equity conversion mortgages for elderly homeowners.”

    The Congress obviously is in a make-believe world where HECMs were created as loans of last resort. I have read about the impact of opium dens on those who did not participate but simply walked in the door. No doubt the conference referred to above was nothing more than an anti-HECM OPM (“other people’s money) den full of its own folly.

    Here is an example of the brilliance in the report: ” As the equity in their home decreases, the amount of the loan increases.” Huh????

  • So the “uninformed congressman” really knows what he is talking about? Must be up for re=election and looking for a cause. FHA NEVER supports irresponsible lenders and they never have. Why he states that “reverse mortgages are bad for seniors” when THAT is actually the biggest misrepresentation. I do challenge him or his staff to show me where it says in the HECM statute “that a reverse mortgage was always meant to be a last resort for seniors”. I’ve been looking for that regulation for hours now………

  • Did any representatives of our industry attend “Fair Housing Counsel” Annual 2014 Housing Conference in Riverside California? Maybe next year.
    I look forward to reading NRMLA’s response to this in a public forum.

    • wealthone,

      How do you explain the HECM program to someone who endorses the following statement? ” As the equity in their home decreases, the amount of the loan increases.” So is the converse true? As the equity increases, the amount of the loan decreases?

      The Congressman does not understand what he endorses.

      • just as you like to make your point on most of your posts, its possible that Peter can make his point with this uninformed public servant

  • Surprise surprise…turns out Mark Takano is running for reelection. His official campaign kick-off was held on March 30, 2014. This is just politics as usual….an excuse for Takano to point to this and tell his constituents and the electorate-at-large that he “cares” about senior citizens. Take this “report” with a grain of salt, it was done in the name of political expediency.

  • The only “Bad Actor” in this totally erroneous report is Mark Takano himself. FHA has always had the protection of the HECM borrowers as their first duty, and new regulations are already in the works to further protect the small minority of borrowers who were affected by recent foreclosures. Furthermore, reverse mortgages were never considered the “option of last resort”, although they filled that capacity remarkably well, in addition to providing America’s seniors several other excellent financial options. Independent counselors guarantee that any unscrupulous loan officers shy away from reverse mortgages.

  • hecmvet,

    Really? Please point out where in my comment that I talked about lump sums. It seems you are very, very confused. There is nothing in the law or the HECM Handbook which disallows lump sums but somehow you are stretching your own credibility by trying to make the purpose clauses read that way. HUD through its HECM Handbook has always permitted lump sums.

    It seems you are also confused about what the order of liens are. For a HECM to have a first position which it must have, all other liens must be paid off or subordinated in a manner acceptable to HUD. So where is it I said that HECM proceeds cannot be used to pay off a mortgage? Are you really that illiterate and desperate to be right about something related to HECMs, just anything at all?

    Where do you find your spirit and intent about the HECM program? Neither the law nor the HUD official handbook on HECMs agree with you. I just love it when myths are justified with double talk or some person saying that something is true just because those making the claims are “true believers.”

    I expect HECM opposers to resort to the tactics you display but one of our own? You have nothing to back you up so you just go on and on with false accusations and nonsense. Just point out where your spirit and intent is found in the law or the HUD HECM handbook. You seem lost and resorting to myths.

    I guess you are still mad that your blind and ridiculous faith (in those offering lines of credit with a fixed rate HECM [fixed but open end] getting the approval of the secondary market) was exposed a few weeks ago. You really need to be a realist and deal with things the way they are, not the way you want them to be.

    • Cynic
      Do you feel better now? ha ha. I am sorry that you completely misinterpreted my comments about your excessively narrow interpretation of the language in the Code.
      I have not “read anything into it” that is not already there and if you take the time to read even a half a paragraph further you will clearly see that your interpretation is in error.
      You are correct, you never mentioned lump sums, which is another error in your reading and understanding.
      As to “spirit and intent” you are correct, it did not make it into the final published version of the Code but there was much discussion back in the day about what the real benefits would be to society.
      They did not survive to be in the condensed “purpose” as you so vociferously insist.
      What were you doing in 1990? I thought so.

      • hecmvet,

        No wonder you are so confused. The HECM program was signed into law by President Reagan on February 5, 1988 and is part of Public Law 100-242. See Library of Congress Thomas Library at http://thomas.loc.gov/cgi-bin/bdquery/L?d100:./list/bd/d100pl.lst:242(Public_Laws).

        I know you love myths and hate facts but the legislators voted the HECM program not you or those who ignorantly declare that the purpose of the program was so that seniors could age in place. Can you think of any fiscally and financially sound mortgage that was not created so that borrowers could age in place?

        The aging in place argument is for the sophomoric. It sounds wise but those who promote it have no idea that all fiscally and financially sound mortgages allow their borrowers to age in place.

      • hecmvet,

        No wonder you are so confused. The HECM program was signed into law by President Reagan on February 5, 1988 and is part of Public Law 100-242. See Library of Congress Thomas Library at http://thomas.loc.gov/cgi-bin/bdquery/L?d100:./list/bd/d100pl.lst:242(Public_Laws).

        I know you love myths and hate facts but the legislators voted the HECM program not you or those who ignorantly declare that the purpose of the program was so that seniors could age in place. Can you think of any fiscally and financially sound mortgage that was not created so that borrowers could age in place?

        The aging in place argument is for the sophomoric. It sounds wise but those who promote it have no idea that all fiscally and financially sound mortgages allow their borrowers to age in place.

  • three corrections Fair Housing Council, liquid ASSETS,
    when Section 255 of the National Housing Act was being deliberated.
    It was recognized that a program that kept people in their own homes and using their own equity to remain financially independent was more beneficial to society and taxpayers than more costly housing and nursing home options that would often fall to Medicaid.

  • Angella,

    It sounds like the Congressman needs better research staff. Based on this example, it seems his staff is more political cronies than reasoned, seasoned, and principled researchers.

  • Reverse Mortgages are not going anywhere and with the massive growth in the Medical Alert Systems World and Adult Day Care along with the lack of retirement dollars saving seniors thousands delaying long term care( 25% of people in nursing homes don`t need to be there )………..so enjoy your 15 min

  • wealthone,

    It is hard to explain a somewhat complex mortgage to someone who thinks that as equity goes down, the balance due increases. Peter may be a great industry leader but a miracle worker, he is not.

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