Reverse Mortgage Revs Drive FHA Reform Bill

Expanding the Federal Housing Administration reverse mortgage program could double originations and increase government revenues by $230 million annually, according to a Congressional Budget Office analysis of an FHA reform bill.The main focus of the bill (H.R. 5121) is revitalizing the FHA single-family program. But the CBO estimates that the single-family portion of the bill would generate only $11 million in new revenues in the first year after enactment. H.R. 5121 removes a 250,000 loan cap on the FHA reverse mortgage program, creates a nationwide loan limit at $417,000, and allow seniors to purchase a new home and get a reverse mortgage in the same transaction. It appears that these legislative changes, along with "robust demand and limited competition," could push HECM endorsements -- the FHA's name for reverse mortgages is home equity conversion mortgages -- to more than 100,000 loans annually, the CBO says. The FHA endorsed 43,000 HECMs totaling $6.2 billion in fiscal year 2005. Meanwhile, HECM endorsements continue to increase at an astonishing rate, and industry representatives are concerned that they could bump up against the cap again in the next four to six months. The House has passed a bill that simply repeals the cap, and the National Reverse Mortgage Lenders Association is hoping the Senate will act soon. But the politics are getting more complex because of the revenues. The House included HECM provisions in a Department of Housing and Urban Development appropriations bill. "Higher loan limits are important, and we would like to see that happen," NRMLA president Peter Bell said. "However, eliminating the cap is critical."