Reverse Mortgage FHA Modernization Update

Last week NRMLA announced that the Financial Services Committee Chairman Barney Frank (D-MA) planed to bring “The American Housing Rescue and Foreclosure Act” to the House floor for a vote.  NRMLA said the plan was a “rollup” piece of legislation that includes a number of housing related matters, including FHA Modernization.

The legislation includes the recent comprise NRMLA and AARP have reached:

  • The position would cap fees at 2% of the first $200,000 of maximum claim amounts plus 1% of the balance thereafter, with an overall cap of $6,000 to be adjusted occasionally for inflation. 
  • A national loan limit at the level that is now being proposed in the FHA mod legislation, $550,440.  132% of the GSE Limit. 
  • Ability to insure HECMs for the purchase of a 1- to 4- unit property in which the mortgagor will occupy one of the units.
  • “Clean-up” of language enacted in the 2000 Housing Act enabling HECMs to be made on co-op units.
  • Prohibition on required purchase of an annuity.
  • A new requirement for the HUD Secretary to issue regulations to protect borrowers from the marketing of financial and insurance products “not in the interest of such homeowners.”
  • A requirement for the Secretary to conduct a study within twelve months of enactment that analyzes and determines the effects of reducing HECM mortgage insurance premiums, taking into consideration costs to borrowers and financial soundness of the program.

Last Thursday the House approved H.R. 3221 by a vote of 266 to 154, more than a dozen “yes” votes short of the two-thirds needed to override a veto.  This is important because President Bush threatened to veto the bill last week when he called it a burdensome bailout that would open taxpayers to too much risk.

But Treasury Secretary Henry M. Paulson Jr., who has been able to work with Mr. Frank in the past, has promised to keep working for a bill that the president would sign, and House Democrats wooed Republican votes by attaching to the Frank bill items that President Bush favors, like an overhaul of the Federal Housing Administration.

H.R. 3221: Foreclosure Prevention Act of 2008

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