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.
“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.”
Written by Elizabeth Ecker