Before the Senate financial reform bill wrapped up last week, Senator Claire McCaskill wanted to “sound the alarm about a very important topic that is in all likelihood not going to get addressed.”
That topic happened to be reverse mortgages, which the Senator from Missiouri said is a “subprime mess in the making”.
McCaskill had originally proposed an amendment to protect seniors from predatory lending abuses in the marketplace but it never made it to the floor for debate. If included, it would have eliminated the reverse mortgage as a possible solution for seniors at the very time they need it most said the National Reverse Mortgage Lenders Association last week.
“I urge my colleagues to take a look at the reverse mortgage program, to be careful of reverse mortgages,” she said late on Thursday.
During the speech, she expressed concerns about seniors using reverse mortgage proceeds to purchase annuities and the growing securitization of HECM loans which McCaskill said have grown from $1.5 billion to $13 billion in one year. “Now, I know that we may not be the brightest lights around here and I know that sometimes we may not get it, but goodness gracious that ought to set off some alarm bells somewhere,” said McCaskill.
Why does McCaskill think there is a place for reverse mortgages? Because people in Congress are trying to find “pay-fors” in the budget to pay for things. The Senator said the Federal Governemnt gets a cut of the initial fees off a reverse mortgage which can be used to pay for items in the appropriation process.
RMD contacted the Office of Management and Budget and learned the premiums from the HECM program are not used to offset the discretionary side of the budget. So McCaskill clearly doesn’t understand how the program works, yet is developing legislation to regulate the industry.
Before finishing, the Senator voices her strong opposition for Congress lifting the cap on the number of HECMs later this year and allowing unlimited reverse mortgages under the guise of “we need to be doing this because its going to help the economy.”
“No, no, no, we need to go back to a cap on reverse mortgages until we have a firm handle on what the potential liabilities down the road,” she said.
It’s not about helping the economy Senator… it’s about the seniors who need the product.
You can watch her testimony below or check out the link here.
