Written by Marty Bell, as originally published in The Reverse Review.

On the Docket: Two Hill Hearings on the FHA’s Future
Amidst the last-minute frenzy preceding the March 1 implementation of sequestration, both the House of Representatives Financial Services Committee and the Senate Banking, Housing and Urban Affairs committee held hearings in February to discuss the 2012 audit of the Mortgage Mutual Insurance Fund and the future of the FHA.

NRMLA staff was in attendance at the House committee hearing, and NRMLA President and CEO Peter Bell testified on behalf of the reverse mortgage industry at the Senate Committee hearing.

More than 40 House members from both parties took turns questioning the sole witness, FHA Commissioner Carol Galante, at a February 13 hearing called by new committee chair Rep. Jeb Hensarling (R-TX) and provocatively titled, “Bailout, Bust or Much Ado About Nothing? A Look at the FHA’s 2012 Actuarial Report.”

In the wake of the report, which indicated that the MMI Fund was net negative $2.8 billion as a result of the HECM program, the tone of questioning volleyed back and forth

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for more than three hours between support (from Democrats) and concern (from Republicans).

As participants and attendees entered the majestic hearing room, the mushrooming national debt was featured on flat-screen televisions on opposite walls. “Debt is the great existential threat to our nation,” Chairman Hensarling said in his opening remarks. “We need a sustainable housing finance system. But I fear the way FHA is operating today is an impediment.”

In her testimony, Commissioner Galante, an accomplished housing developer prior to entering the public sector, reported, “Much of the progress that we are seeing in the housing sector has been possible because of the FHA, which has provided access to homeownership for millions of American families and without which the crisis would have been much deeper. In fact, Moody’s Analytics estimates that were it not for FHA’s presence during the crisis, house prices would have fallen 25 percent further than they did already. FHA’s contribution has not been without stress, however.” Galante went on to report changes to the fund—some implemented, some under consideration—intended to restore its health.

Then the questions began flying. From the right came a good deal of suspicion. “We have not gotten good information,” said Rep. Randy Neugebauer (R-TX), recently appointed chair of the Insurance, Housing and Community Development subcommittee. “The FHA reported everything’s OK, but it isn’t. What is the true condition?” Rep. Michele Bachmann (R-MN) said the United States is “the brokest nation in the history of the world” and cannot afford to make loans to people who can’t or won’t pay them back. Rep. Sean Duffy (R-WI) accused the FHA of either not having the proper information or lying.

Voices to the left of the chair staunchly defended both the fund and the FHA. “The fund is meant to be countercyclical,” said Rep. Carolyn Maloney (D-NY). “It expands in time of crisis and contracts when the market is healthy.” Ed Perlmutter (D-CO) thanked the FHA for keeping the housing market alive through the recession.

Through it all, Galante remained above the fray, despite sitting at a floor-level table facing the members elevated on ascending risers like an orchestra. She attributed the fund’s deficit to the 2007-2009 crisis years’ books of business and said actuarial reports indicated the loans made since 2010 were the most profitable in the agency’s history. Reiterating additional changes that would add revenue and strength to the fund, Galante asserted, “We have confronted FHA’s stress at every stage of the lending cycle.”

Before the Senate
The following is an excerpt from Peter Bell’s testimony on February 28:

“One of the challenges HUD has faced in managing the HECM program has been its inability to move swiftly in making programmatic changes that could enhance the security and financial performance of the Mutual Mortgage Insurance Fund. Reverse mortgages are a relatively new concept and there has been a learning curve as HUD and the industry have observed how these loans perform. While some of the lessons to date have been translated into program improvements as described earlier in my testimony, others await implementation. Unfortunately, during the downturn, HUD was unable to move fast enough in making some desired changes.

This is due to the circuitous route that HUD must follow to modify its regulations. Changes to many aspects of the HECM program must be made in accordance with the Federal Administrative Procedures Act and generally take up to two years to be implemented. If FHA is granted the authority to modify the HECM program through the issuance of Mortgagee Letters, in lieu of Rule changes, program changes and enhancements could be implemented in a matter of months, not years.

There are a few adjustments that FHA can currently do by Mortgagee Letter, such as changing the principal limit factors—something that they are currently doing to essentially implement a moratorium on the fixed-rate (full draw) HECM Standard loan option. However, there are other thoughtful, longer-term solutions to strengthen the program that currently require pursuing the formal regulatory development process.

Both Assistant Secretary for Housing/Federal Housing Commissioner Carol Galante, in recent testimony before this Committee, and the 2012 Independent Actuarial Report on the Mortgage Mutual Insurance Fund, suggested that it would be helpful if Congress provided HUD with the authority to make such changes through the issuance of Mortgagee Letters. NRMLA urges Congress to quickly grant HUD that authority.”

NRMLA Webinar Reports on the HUD Briefing
Following a HUD/industry phone conference on February 15 to explain the moratorium on fixed-rate, full-draw Standard loans and further actions being considered to strengthen the MMI Fund, NRMLA conducted a members-only webinar on February 19 to report on the call and answer questions about the changes. About 150 members participated in the call.

Discussion and explanation of the additional changes will continue at NRMLA’s Western Regional Meeting on May 19-20 in Irvine, California.

In Committees
A new Membership Committee has begun convening to discuss strategies for enhancing services, growing membership and retaining existing members.

Member delegates from companies of all sizes are invited to participate. Volunteers need to be willing to allocate time to meet on a consistent basis, including monthly phone meetings, as well as outreach to potential new members.

The committee is chaired by Sandy Tennekoon of MoneyHouse and Bob Sivori of Reverse Mortgage Funding, LLC.

Any member delegate wishing to participate on the committee should email NRMLA’s Marty Bell at [email protected].

The newly formed Public Relations Committee is finalizing an electronic survey that will help NRMLA better assess members’ communication needs and identify ways to communicate more effectively with the industry at large.

The committee is distributing the survey to further understand individuals’ goals and to gauge the importance of various NRMLA programs, such as consumer education programs.

“We feel this is the natural first step for the committee and are looking forward to receiving feedback,” says Chairman Jean Noble, director of marketing at Urban Financial Group. “The research will provide direction and help us build campaigns that have consensus and value to our members and the industry at large.”


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