The Federal Housing Administration does not intend to reinstate the fixed rate standard reverse mortgage product it suspended earlier this year, according to one of its chief officials.
In a hearing before Senate Banking Committee members Tuesday, Carol Galante, assistant secretary for the Department of Housing and Urban Development, stated that the agency does not plan to reinstate the formerly popular product under FHA’s Home Equity Conversion Mortgage program.
The statement came in response to an inquiry from committee member Senator Bob Corker (R-Tenn.), who asked whether the administration planned to reintroduce the product.
“It is understanding you have no intention of reinstating [the product],” Sen. Corker said.
“That is absolutely correct,” Galante answered.
The hearing was called to discuss the FHA Solvency Act of 2013, which specifies stabilization of the HEMC program by allowing the Secretary to manage the HECM program through mortgagee letters issued concurrently with rulemaking.
Galante underscored the necessity to make the changes quickly in outlining those that HUD is seeking, urging the committee to approve a separate House-passed reverse mortgage bill (H.R. 2167).
“We are looking for authority to make additional changes that would help the situation even more,” she said. “[We would like a] borrower assessment and better limitations in terms of what [borrowers] can take out.”
Without the authority to make the changes, Galante said, the administration will be forced to make undesirable blunt changes to shore up the program and rebalance its risk both for the FHA’s insurance fund as well as for senior borrowers.
“If we can’t make those nuanced changes, we are going to have to say the entire amount [that can be borrowed] is going to be just lowered for everybody across the board,”Galante said. “It would be much less useful and for far fewer people. We would rather make the nuanced changes to get at the right problem than that across-the-board cut.”
HUD has requested the authority it is seeking on many occasions following reports that losses to FHA’s insurance fund largely attributed to its reverse mortgage portfolio could require a taxpayer bailout.
Galante said the authority is needed before the next fiscal year, which begins October 1.
Written by Elizabeth Ecker
