Both chambers of Congress have now approved legislation needed to reduce risk for reverse mortgage borrowers. Late Tuesday, the Senate passed The Reverse Mortgage Stabilization Act. On June 12, the House approved the act.
The bipartisan bill would "authorize the secretary of Housing and Urban Development to establish additional requirements to improve the fiscal safety and soundness" of the Home Equity Conversion Mortgage program.
In an effort to more appropriately match loans with potential borrowers, leaders at HUD requested the authority to quickly add consumer safeguards and make other changes to improve financial performance of the HECM insurance fund.
"HUD officials have been responsive and responsible administrators of the federal HECM program since it was created more than two decades ago," said Peter Bell, president and CEO of the National Reverse Mortgage Lenders Association. "This legislation gives them the authority to use HUD’s experience to make changes that will better meet the needs of borrowers."
HUD is considering the following changes: financial assessments of HECM applicants to determine if they have the capability of meeting the responsibilities of the loan; mandating the set-aside of funds for tax and insurance payments to ensure borrowers can meet those obligations; restrictions on the amount of proceeds that can be drawn initially, in order to prolong the useful life of the assets; and including all borrower spouses on loans.
"All of these changes consider both the best interests of borrowers and the ongoing health of the government insurance fund," Bell said. "Historically, HUD has made smart changes to improve the HECM program, strengthen the insurance fund and fulfill its mission of helping aging Americans maintain and remain in their homes."
"The importance of reverse mortgages as a financial tool for American seniors brought together leaders in both parties, both chambers of Congress and the Administration," he added.
Bell made an effort to thank Senators Robert Menendez, Tim Johnson and Mike Crapo, as well as Congressmen Denny Heck and Michael Fitzpatrick for their leadership in getting the bill to the finish line.
Federal Housing Administration Commissioner Carol Galante sent out a statement Wednesday morning thanking the Senate.
"I would like to thank the Senate for yesterday's bipartisan passage of the Reverse Mortgage Stabilization Act, giving the FHA authority to make structural changes to help make the HECM program financially sound for the future. This helps ensure that seniors who have worked hard their entire lives to purchase and maintain their home can continue to enjoy the comfort and security of that home. I commend the House and Senate for their bipartisan efforts to pass this legislation to further secure the financial stability of the FHA."