Reverse Mortgage Legislation Update: March 25, 2010

In the most important news of the week, the Health Care Reform Bill passed the House of Representatives by a 219-212 vote after weeks of intense lobbying by the Democrats. President Barack Obama signed the bill, the most significant health care legislation since the Great Depression, into law on Tuesday.

On the heels of the Patient Protection and Affordable Care Act, the Democrats have now made Financial Reform their next priority. The Financial Services Bill has been presented to the Senate, and two crucial Republicans on the Senate Banking Committee, Senator Judd Gregg (R-NH) and Senator Bob Corker (R-TN), have both said they expect the legislation to pass this year. A new Democratic strategy appears to be emerging: express confidence that a bill will pass and urge Republicans to work with Democrats to help change the legislation into something they can support, rather than opposing the legislation altogether.

Rep. Barney Frank (D-MA) has said that the bill will be the top priority for Congress once they return from their recess. Elizabeth Warren, head of Congressional oversight for the Troubled Asset Relief Program (TARP), is rumored to be a top candidate to head the proposed Consumer Financial Protection Agency, should the legislation pass. She is also one of the proposed agency’s largest proponents.

Speaking of TARP, Bank of America announced that it would begin reducing mortgage balances for troubled homeowners under the Home Affordable Modification Program (HAMP). Bank of America is offering a maximum reduction of 30% of the value of the loan. The program will be initially targeted at 45,000 Countrywide borrowers, though 1.2 million Bank of America borrowers are in default.

Borrowers must be underwater, owing at least 20% more than the current value of their home to qualify for the program. Since eligible borrowers will be far underwater, reverse mortgage eligibility is not likely to see a boost from the program.

Also, the Illinois House of Representatives recently passed SB 3287. The bill would amend the Illinois High Risk Home Loan Act (HRHLA) to ensure that reverse mortgage loans would not be considered “high risk home loans”.

Written by Reva Minkoff

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