The reverse equity debate inside the Rayburn House Office Building reached a boiling point Thursday as representatives from the Federal Housing Administration listened to lawmakers fire off questions about the importance, or lack thereof, of the reverse mortgage program.
Congressman Randy Neugebaurer, R-Texas, demanded to know why the housing agency is still in the reverse mortgage business.
Charles Coulter, deputy assistant secretary for single-family housing at FHA, was quick to the draw and explained why he values the Home Equity Conversion Mortgage program.
"FHA was set up by Congress to meet the affordable financing needs of under-served markets," Coulter explained.
Coulter added, "Seniors will not have the benefits that our parents did such as pension plans, 401Ks. They will be heavily reliant on home equity and this program allows them to responsibly tap into their home equity."
Of course, the biggest question — or rather debate — of the hour was what seems to be the elephant in the room on Capitol Hill, bringing private capital back into the reverse mortgage market.
Congressman Joyce Beatty, D-OH, was the one who questioned if there was even a possible chance to allow private capital back into the reverse mortgage market in order to reduce the government’s burden of risk.
Once again, Coulter was quick to jump in.
He explained that private capital existed in the reverse mortgage market back in the heyday of 2006 — when the market was heating up — and investors were interested in entering the space.
However, we are far from the peak levels of 2006 and as a result, investors are not going to put all of their eggs in one basket.
Coulter attributes the lack of private capital to an unsustainable housing market and said until the economy provides a clear, steady path to housing, we will not see private capital re-entering the market.
If the reverse mortgage program is becoming such a big challenge for regulators and Congress doesn’t take action to intervene, what is there to do?
Again, Coulter issued his two cents, explaining that there are many actions that can be taken by the FHA without action by Washington.
"We want to make structural changes to the program including capping the amount of allowable draw, instituting financial assessment, which currently doesn’t exist, mandate the use of escrow accounts and deal with the issue of non-borrowing spouses," he urged.
However, the issue is if FHA will actually implement such actions and if there’s any chance at all that Congress will address the reverse mortgage program issue head on.