Senate Passes HECM Reform Bill

The Senate has passed a HECM reform bill by unanimous consent that will give the Federal Housing Administration the authority to quickly fix its troubled reverse mortgage program by issuing mortgagee letters.

The House passed the same bill (H.R. 2167) in June. So the Senate’s action Tuesday evening means the HECM reform bill can be sent to the White House for the president’s signature.

FHA commissioner Carol Galante urged the Senate to pass H.R. 2167 so her agency could reduce the risks to the Home Equity Conversion Mortgage program without dramatically cutting back on the HECM program, which could harm seniors.

The Reverse Mortgage Stabilization Act (H.R. 2167), sponsored by Rep. Denny Heck, D-Wash., requires lenders to conduct financial assessments to ensure a HECM loan is the right product for a senior. It allows FHA to set limits on a first draw on a new HECM loan and require escrow accounts for property taxes and homeowners insurance, if necessary.

Importantly, this bill allows FHA to implement these reforms quickly via mortgagee letter, as opposed to going through the long regulatory rulemaking process. FHA is expected to implement the changes before the end of September.

“This measure is needed because FHA lacks broad powers to respond quickly to problems in the reverse mortgage program and stem losses,” Heck said.

The reverse mortgage industry and many consumer groups supported the HECM bill.