Housing and Urban Development secretary Shaun Donovan is pressing House and Senate Banking leaders for the authority to regulate FHA’s reverse mortgage program through the issuance of mortgagee letters.
The secretary told House appropriators that it can take up to 18 months to issue a final rule under the regulatory process that requires public notice and comment.
However, HUD could act more quickly to make important reforms and stem losses to the
The HECM program is projected to report a loss of $5.4 billion for FY 2013, which ends Sept. 30.
“Without this new authority, we will have to take more dramatic steps on pricing and other things—that will both protect the fund but also I fear could have a negative impact on seniors,” Donovan testified Wednesday. “So it is critical that we get this done before the end of the fiscal year,” he added.
HUD has already acted this year to suspend originations of a fixed-rate full-draw HECM product that is responsible for most of the defaults and losses to the FHA mortgage insurance fund.
FHA also is encouraging reverse mortgage lenders to conduct financial assessments of seniors and require escrows for taxes and insurance in HECM loans. But FHA wants to mandate such requirements through the issuance of mortgagee letters.
The HUD secretary noted that these steps are having an impact and FHA is seeing better performance on HECM loans.
“Some of those steps are having a positive effect—but that does not short-circuit the need for this authority to do changes without full notice and comment rulemaking,” Donovan testified.
The secretary also commented that HUD is “actively involved in discussions” with House Financial Services Committee chairman Jeb Hensarling, R-Texas, about the mortgagee letter issue.
