Sen. Robert Menendez, D-N.J., has proposed a Home Equity Conversion Mortgage reform bill in response to the Federal Housing Administration’s efforts to get a better handle over its reverse mortgage program.
At a Senate Banking Committee hearing, the New Jersey senator indicated his bill would restrict full draws on fixed-rate
“FHA wants to limit the amount of money on fixed-rate full-draw loans,” said Peter Bell, president and chief executive of the National Reverse Mortgage Lenders Association.
“I think our legislation will deal with this,” Menendez said in response.
His bill is also expected to give FHA the authority to make immediate changes to the HECM program via mortgagee letters. Currently the agency is tied to a time-consuming regulatory process.
FHA commissioner Carol Galante recently told a House committee that she wants reverse mortgage lenders to conduct financial assessments of seniors to be sure they can continue to meet their obligations to pay taxes and insurance, as well as maintain the property, after they take out a HECM loan.
Going through the regulatory process could take a year and a half, Galante said. “What we are asking Congress for is the authority to make those changes through guidance.”
At the Senate hearing on Thursday, Sen. Bob Corker, R-Tenn., noted that giving FHA the authority to regulate via mortgagee letters appears to have a lot of support.
The FHA HECM program has run into financial problems due to the drop in house prices and the recession. And many seniors have ended up in technical default because they can’t afford to pay their property taxes and homeowners insurance.
