Reverse mortgage stakeholders fielded questions Tuesday before a Congressional panel comprising two senators. Spanning topics from non-borrowing spouse issues to details on program changes proposed by the Department of Housing and Urban Development, Sens. Robert Menendez (D-New Jersey) and Jerry Moran (R-Kansas) sought answers on the best course of action for sustaining the Home Equity Conversion Mortgage program.
“There are real concerns about HECM and its portfolio and how it could lead to the Federal Housing Administration having to draw on the Treasury,” said Sen. Menendez. “How do we get a handle on this problem, and what can we do to promote long term sustainability for seniors as well as the Mutual Mortgage Insurance fund?”
The hearing falls several months following the Obama Administration’s proposed budget for fiscal year 2014, which pointed to a potential $943 million FHA bailout due to reverse mortgage losses sustained in the administration’s most recent books of business.
“Congress must act now,” Menendez, who has sponsored legislation to grant HUD additional authority to make program changes.
With respect to the changes proposed by HUD, which would require the additional authority in order to bypass the rule making process, the reverse mortgage industry strongly supports the changes, National Reverse Mortgage President and CEO Peter Bell told the panel.
“The three primary changes that FHA would like to quickly implement on the program, (a.) financial assessment of borrowers; (b.) principal limit utilization restrictions; and (c.) tax and insurance set-asides, would not only protect the FHA insurance fund, but simultaneously provide yet another level of safeguards for consumers,” Bell said.
The National Council on Aging also spoke in support of the changes, noting the importance of funding and resources for reverse mortgage counseling.
“The changes proposed could have a stabilizing effect on the program, assuring its existence for years to come. NCOA’s primary concern is ensuring that vulnerable older adults have access to appropriate resources to help them age in place with dignity, coupled with strong protections against financial abuse and exploitation,” said Ramsey Alwin, senior director of NCOA’s economic security program.
AARP’s Senior Strategic Policy Advisor Lori Trawinski expressed concerns about bypassing the rule making process, which would not allow for a public comment on the changes.
“While we support the idea of tax and insurance escrows or set-asides, the public should have the opportunity to comment on the specifics of such program changes during the normal rule making process to ensure that changes contain adequate consumer protections and are reasonable regarding the amounts to be escrowed or set aside,” Trawinski said.
The house passed its bill by unanimous consent earlier this month, with the Senate yet to vote on its own legislation. Meanwhile, HUD has also said it has rule making under way.
“We look forward to looking at the house’s legislation,” Sen. Menendez said. “The opportunity to move forward is one we may have to consider.”