U.S. Senator Robert Menendez (D-N.J.) introduced a bill yesterday that would allow the Federal Housing Administration (FHA) to implement reforms to its reverse mortgage program.
The long-awaited changes have been a subject under discussion among the industry, Congress members and the FHA, which has been seeking the authority needed from Congress to make the necessary changes.
Coined “The HECM Stabilization Act of 2013,” the bill, S. 469, allows the FHA to implement “much-needed” program reforms. Under the bill, those include reducing the amount of money taken by borrowers at origination to sustainable levels; performing borrower financial assessments to determine if a HECM is affordable; and establishing escrow accounts with lenders to prevent foreclosures from tax and property insurance delinquencies.
“HUD has made some changes to help keep the program afloat, but their hands are tied,” said Menendez. “I urge my colleagues to pass my bill immediately so HUD can make additional, necessary reforms to keep the program alive, while also reducing taxpayer liabilities by billions of dollars over the coming decade.”
During a hearing last week before the Senate Banking Committee, senators said they were willing to consider granting FHA the authority to make changes to its reverse mortgage program. The introduction of the bill solidifies that commitment.
Congressional authority would enable FHA to expedite its reform process, rather than having to go through rule making to change program regulations, which could take months and even years.
The National Reverse Mortgage Lenders Association (NRMLA) expressed its support of Menendez’s bill.
“We are glad to see Senator Menendez step forward to introduce the bill that gives HUD the authority it needs to manage the program,” said NRMLA President Peter Bell.
The bill has received support from NRMLA as well as senior borrowers represented by the Coalition for Independent Seniors.”Now with a bill articulated, and a tangible piece of legislation, we have a core center of gravity to make it all happen,” says CIS’s West Richards.
Written by Jason Oliva