As HUD's Federal Housing Administration (FHA) faced a looming solvency crisis with its popular reverse mortgage program, U.S. Senator Robert Menendez applauded a bi-partisan agreement which allows the Agency to immediately implement changes necessary to save the program. Not only did this agreement clear the way for the Senate to send President Obama the Home Equity Conversion Mortgage (HECM) bill to sign, the Senate Banking Committee today also approved additional reforms to make the program more sustainable for seniors and protect taxpayers.
"As Americans grow older, the economic and health challenges they face also grow, making it harder for them to stay in their own homes," said Senator Menendez. "The HECM program provides more options for seniors who want to live independently, which is why I'm so pleased we were able to negotiate this agreement to ensure it remains an available option for older Americans."
Menendez added: "I'm grateful to Chairman Johnson for his commitment to this program and his leadership in brokering this agreement."
Without the agreement, HUD would have been forced to begin implementing devastating across-the-board cuts in the program before October 1 in order to preserve its solvency.
Menendez has been working for months to ensure the immediate and long term sustainability of the federal reverse mortgage program, introducing the HECM Stabilization Act of 2013 (S. 469) in March and holding a hearing with experts last month.
The Home Equity Conversion Mortgage (HECM) program enables seniors to draw on some of the equity in their home. Many seniors use it to supplement Social Security, meet unexpected medical expenses, make home improvements and more. Unlike a traditional home equity loan or second mortgage, HECM borrowers do not have to repay the HECM loan until they die, sell their home or no longer use it as their principal residence.
As part of the bipartisan agreement Menendez negotiated, last night, the Senate approved legislation to authorize HUD to make expedited changes to improve the financial condition of the HECM program. The legislation, which already passed the House, will be sent to the President for signature.
Further, the Senate Banking Committee today also approved (as part of the FHA Solvency Act of 2013) more specific reforms to improve the program for borrowers and protect taxpayers, including:
- Reducing the amount of money taken by borrowers at origination to sustainable levels
- Performing borrower financial assessments to determine product affordability and suitability
- Establishing escrow accounts or set-asides to prevent foreclosures from tax and property insurance delinquencies
- Requiring HUD to monitor and report on the financial condition of each HECM product offered under the program