Housing and Urban Development Secretary Shaun Donovan today asked members of Congress for more authority to manage the Federal Housing Administration’s reverse mortgage product to avoid making blunt changes to the program.
Following FHA’s independent audit revealing the reverse mortgage portfolio has an estimated value of negative $2.8 billion, the agency said it has no intention of suspending the program to shore up funds, Donovan told the Senate Committee on Banking, Housing and Urban Affairs during a congressional hearing on Thursday.
Though pressed by a few committee members that a suspension of the reverse mortgage program would ultimately save taxpayers money, Donovan explicitly expressed that a potential moratorium on reverse mortgages would heighten the economic crisis for seniors who can benefit from the program.
“Frankly, we did make changes [to the reverse mortgage program]. We introduced a safer alternative through the Saver program,” Secretary Donovan said. “We could do what you said, which is to create a moratorium. But we are concerned about the economic crisis seniors will go through if we are eliminating an option that helps some of those seniors.”
Donovan responded by asking again for more authority for FHA to manage the Home Equity Conversion Mortgage program, as noted in the FHA’s audit report.
“Our preference would be to change the structure of the program if we can get authority from you,” he said, noting FHA’s desire to make the changes in the upcoming session of Congress.
Senator Bob Corker (R-TN) responded that gaining such authority seemed possible. “Most would support that,” he said.
Donovan stressed the majority of the impact on the insurance fund stems from the fixed rate HECM, which requires a full draw at closing and comprises an estimated 70% of new FHA reverse mortgages.