After receiving what President Barack Obama described as a “shellacking” in the mid term elections, additional support for the Federal Housing Administration’s reverse mortgage program could be harder to find with fewer Democrats in power.
At the National Reverse Mortgage Lenders Association event in New Orleans, FHA Commissioner David Stevens told RMD that while the HECM product is critically important, the agency was worried it could’ve lost the program facing a $250 million subsidy request from the Office of Management and Budget earlier this year.
“Without the subsidy from Congress, we were at risk of changing the principal limits enough that it would’ve made the program unusable for many in order to break even from a budget standpoint,” he said.
Instead of requesting the subsidy, FHA developed the HECM Saver to offset the need for additional funds. However, unless the program becomes cash flow positive, it could be a challenging end of fiscal year 2011.
“I think it will be harder in future sessions to expect any subsidy, given the change in congress,” Stevens told RMD. “There is going to be more fiscally conservative views coming out and we need to be very careful making sure that the HECM Saver gets up and running.”
It’s not just the HECM product, he worries about all of FHA’s programs, “we don’t need to be asking for a government subsidy for any mortgage product.”
Peter Bell, President of the NRMLA agreed with the Commissioner’s statements. ‘We’re going to see a very significant change in the leadership,” he said.
With Republicans taking control of the House of Representatives, Congressman Spencer Bachus (R-AL) is in position to become Chairman of the House Financial Services Committee, replacing Congressman Barney Frank (D-MA), someone who understood the reverse mortgage product very well.
“They have an attitude that the government should be smaller and do fewer things and that could mean shrinking FHA,” said Bell.
As an example, he said there is already discussions in Congress to let the higher HECM loan limit expire at the end of the fiscal year. “I’ve been put on notice that there is a sentiment to not continue it, so there is a chance it could roll back to $417,000 unless we can convince them otherwise,” he said.
In order to do so, the association hopes to point to a lot of cases where the higher loan limit helped people save their homes from foreclosure. “It’s going to be a challenge for us going forward,” he said.