The late September hearing of the U.S. House of Representatives Financial Services Subcommittee on Housing, Community Development, and Insurance provided a rare moment of insight into the perspectives that national politicians maintain toward the Home Equity Conversion Mortgage (HECM) program.
Over the course of the proceeding, more Republicans expressed doubt concerning the viability and effect of the program, while prominent Democrats appear to be taking a more active lead in supporting and potentially strengthening the program’s existing provisions.
In a political climate often characterized by strong partisanship, a few specific moments may have indicated the level of support and criticism that the HECM program experiences among the two political parties.
At the beginning of the hearing, subcommittee ranking member Rep. Lance Gooden (R-Tex.) gave a statement of general support for the HECM program, while also stating that evidence suggests that the program can be improved to address some key complaints that have arisen.
“I’d like to take a moment to acknowledge the importance of reverse mortgages in general, and specifically HUD’s Home Equity Conversion Mortgage program for our aging population,” Gooden began. “The HECM program was created to allow seniors to access their real estate equity, while making it possible to stay in their homes. Even today, its primary goal is guided by the good intention of allowing seniors to age in place, and protecting a post-retirement lifestyle without the need of selling their home.”
The arrival of some individual, but persistent concerns related to reverse mortgages offers the congressman demonstrable proof that some operational aspects of the program could use another look from lawmakers, he said.
“While the HECM program is a good way to provide this opportunity to our elderly, I believe there’s still some more room for improvement. Recently, several concerns have been raised about the program: concerns about HUD’s servicing procedures, problematic foreclosures and the issue of non-borrowing spouses all lead me to believe that this program needs some measure of reform,” Gooden said.
Solutions need to be thought of in concert with HUD and other members of Congress, Gooden said, with the congressman also offering acknowledgment for one of the draft reverse mortgage bills recently crafted by Democrats.
“I’d like to acknowledge Chairman Clay’s bill to tie the HECM maximum loan limit to area maximum loan limits for FHA’s forward mortgages. This is an interesting idea, and we should always welcome ideas that can make a product better,” Gooden said.
When given the opportunity for cross-examination, Rep. Gooden’s questions to both the Urban Institute’s Laurie Goodman and the National Reverse Mortgage Lenders Association (NRMLA)’s Peter Bell were clarifying in nature, related to Ms. Goodman’s research on potential HECM servicing shortcomings.
Rep. John Rose (R-Tenn.) expressed concern about the HECM program’s drag on the Mutual Mortgage Insurance Fund (MMIF), asking the witnesses if both Congress and HUD should be concerned about the current health of the fund. Goodman responded by advocating for the reverse mortgage program to operate in a fund other than the MMIF.
Rep. Scott Tipton (R-Colo.) limited his questions to statistic and structural information related to HECM loans, but also additionally asked Bell and Goodman if there was anything that policymakers can do to spur greater “innovation and consumer choice” in the reverse mortgage market, after noting an observation that major institutions like MetLife and Bank of America have exited the space.
Bell pointed out in response that those exits were primarily due to non-reverse mortgage market factors, like the proliferation of specialty finance companies and nonbank lenders.
Owing to their current leadership position in the legislative body, Democrats are currently steering the legislation being formed and deliberated upon in the House of Representatives, and a couple of key Democrats made a point of drafting two separate bills that relate to the reverse mortgage program. They were made available for public view the same day that the hearing took place.
Two of the key Democratic legislators who offered comment on the state of the reverse mortgage program are also sponsors of one of the recently-revealed pieces of draft legislation, which seeks to address and reduce the numbers of foreclosures endured by reverse mortgage borrowers. House Financial Services Committee Chairwoman Maxine Waters (D-Calif.) addressed witness Sarah Bolling Mancini, an attorney with the National Consumer Law Center, agreeing with her concerns related to reverse mortgage servicing issues as something that may have to be addressed legislatively.
“I don’t know if our bill covers that problem,” Waters told Mancini. “That goes beyond […] what we’re attempting to do. I think we have to think further about [whether or not] a servicer is able to identify that there is a problem [that could lead to] foreclosure, maybe we need to think about that even more and see what we can do.”
Interestingly, however, Waters described that her past ambivalence toward the HECM program – in terms of whether or not it does what it intends to do – has given way to a recognition of the value, and even the necessity of the program.
“There have been years where I have been concerned about the program, and wondering whether or not it was doing what it was supposed to do,” Waters said. “And again, let me reiterate that I do recognize that it has value that must be protected, and value that must be extended so that we make sure we’re providing the kind of safety and security that our seniors need and deserve.”
Rep. Heck noted that the conversation in Congress surrounding the HECM program has shifted significantly from the days of the 2008 financial crisis, where it was not uncommon to hear discussions related to whether or not the program should even exist. Now, he notes, lawmakers are more dedicated to simply strengthening the HECM program and ensuring its longevity.
“We’ve come a long way, and we’ve come that long way I think because more broadly, people recognize its value in part due to some of the changes that we’ve made, and in part due to [the industry’s] willingness to advocate for it and propose additional changes,” Heck said.
Democrats and Republicans agree
Finding agreement between Democrats and Republicans on Capitol Hill is a rarity given the current polarization in the American political climate, however representatives from both political parties seem to generally agree that the HECM program has demonstrable value. Support for the basic idea of helping seniors to age in place and providing a path to additional funds in retirement understandably enjoys bipartisan support, and a federally-sponsored program that aims to address that ongoing goal provided for a distinct lack of drama during the hearing.
While each party maintains different overall grievances they feel require attention in the program – its impact on the federal bottom line for Republicans, and levels of foreclosures resulting in displacements for Democrats – each seems to agree that the federal reverse mortgage program may require strengthening, but should continue.