The Home Equity Conversion Mortgage fixed rate, otherwise known as a fixed rate reverse mortgage, has been receiving a lot of attention of late, with FHA to cease offering the fixed rate HECM at the end of this month. Prognostications for its financial longevity if it remains the way it stands hasn’t been favorable. A second reverse option, the HECM fixed saver, will endure. In response to this, New Jersey senator Menendez has introduced a “Bill to Help Seniors Age-In-Place While Saving Taxpayers Billions.”
S.469, The HECM Stabilization Act of 2013, allows the FHA to implement much-needed reforms to the HECM program such as:
• reducing the amount of money taken by borrowers at origination to sustainable levels;
• performing borrower financial assessments to determine if a HECM is affordable;
• establishing escrow accounts with lenders to prevent foreclosures from tax and property insurance delinquencies.
The bill enjoys support from the reverse mortgage industry represented by the National Reverse Mortgage Lenders Association (NRMLA) and senior borrowers represented by the Coalition for Independent Seniors (CIS).
“While no one denies the HECM program has greatly improved the quality of life for our seniors, it is simply unsustainable as it is,” said Senator Menendez. He acknowledges that HUD has made some changes to keep the program afloat and urges his colleagues to pass the bill immediately so that HUD can keep the program alive while fulfilling the promising headline of his web page about the bill.
Menendez posits that, "one of the challenges HUD has faced in managing the HECM program has been its inability to move swiftly in making programmatic changes that could enhance the security and financial performance of the Mutual Mortgage Insurance Fund."
The same sentiment has been echoed by others on Capitol Hill. Recently, Peter Bell, President and CEO of NRMLA testified before the Senate Banking Committee, saying “If the FHA is granted the authority to modify the HECM program through the issuance of mortgagee letters, in lieu of rule changes, program changes and enhancements could be implemented in a matter of months, not years.” This would grant a new breath of life to a program that has continued to help seniors be able to age in place with more financial tools at their disposal and continued peace of mind.