The reverse mortgage industry and the Department of Housing and Urban Development are moving quickly to get authority from Congress to make program changes after the Obama Administration’s budget showed a projected $943 million shortfall.
If the authority is given, HUD would be able to make changes through Mortgagee letters rather than go through the long rule making process, which is currently the only option.
Without the new authority, the agency says it will be forced to make blunt” changes to shore up the program by the end of the fiscal year. HUD and the industry has already taken steps to get the legislation needed.
“We are working with the authorizers,” said Shaun Donovan, Secretary of HUD before the House Appropriations Committee Wednesday, adding that after seeing an FHA reform bill that passed the House last year, he is hopeful that another bill could track the same progress.
“We believe these reforms are absolutely critical,” he said.
Donovan also stressed concerns that FHA reform could be put off as Congress decides how to wind down Fannie Mae and Freddie Mac, in an attempt to address FHA changes along with the other government sponsored entities in one bill. The FHA change is needed sooner, he said.
“It’s important that we move quickly on these steps to shore up the fund and not delay those with the broader [reforms],” he said.
The changes are supported by the National Reverse Mortgage Lenders Association and other trade groups, which are working quickly to get the legislation approved before the end of the fiscal year.
“We are working with various members from both sides of the aisle in both houses of Congress to try and gain this authority for FHA,” says Peter Bell, NRMLA president and chief executive officer.
The changes needed could be combined with larger FHA reform, or as standalone legislation according to industry groups.
In March, Sen. Robert Menendez, (D, N.J.) introduced The HECM Stabilization Act of 2013, which would allow 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.
The Mortgage Bankers Association expressed its support for the changes in the bill during a hearing last week before members of the House Financial Services Committee.
“MBA is concerned that if HUD is not granted this authority in a timely manner through the HECM Stabilization Act of 2013, or another similar mechanism, the agency will be forced to take drastic measures to severely curtail the program, thereby eliminating an important financial tool for American seniors,” said MBA President and CEO David Stevens.
Whether or not FHA will need support from the Treasury is still up in the air, but changes should be addressed in the meantime.
“I am concerned that we will need to draw at the end of the year given what we know at this point,” Donovan said Wednesday. “But I’m not going to give up until a day before the end of the fiscal year because I want to make sure we are doing everything we can.”
Reverse mortgage advocates are working with elected officials toward the change in a timely manner.
“This is a time for [us] to be available for questions and be up on the Hill getting our message out,” says West Richards of the Coalition for Independent Seniors, a group formed by members of the reverse mortgage industry.
Written by Elizabeth Ecker
