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Washington, DC - Today, the House passed overwhelmingly H.R. 391, a bipartisan measure to temporarily increase caps on the Home Equity Conversion Mortgages (HECM), also known as the "Reverse Mortgage Program." The bill authorizes the Secretary of Housing and Urban Development (HUD) to continue to insure Home Equity Conversion Mortgages so that thousands of America's seniors whom are cash poor but equity rich will continue to be able to benefit from this program. The bi-partisan bill was led by Rep. Jim Matheson (D-UT), and co-sponsored by Reps. Ginny Brown-Waite (R-FL), Geoff Davis (R-KY), Gary Miller (R-CA), Maxine Waters (D-CA) and House Financial Services Committee Chairman Barney Frank (D-MA).
"I was excited to work with the Committee to come up with this solution for deserving senior citizens," said Rep. Jim Matheson. "The number of Utah seniors who struggle to make ends meet and maintain adequate housing conditions is growing. I am concerned about that trend--especially the age group 85 and over, who may be in frail health and have the greatest need for flexibility in meeting their expenses. The primary beneficiaries of this program are elderly widows."
Available since 1989 to homeowners aged 62 and older, the FHA Home Equity Conversion Mortgage (HECM) is the oldest and most popular reverse mortgage product, accounting for 90 percent of the total market. The reverse mortgage is a unique loan that enables senior homeowners to remain in their homes and remain financially independent by converting part of the equity in their homes into income without having to sell the home, give up title, or take on a new monthly mortgage payment. Payments to the borrower come in the form of a lump sump, monthly payments, a line of credit, or a combination thereof. Thus, the funds can be adapted to the financial needs of the senior taking out the loan. All HECM loans are insured by the federal government through the Federal Housing Administration (HUD).
Over the past few years, the HUD HECM program has proven to be a growing success. Its rapid pace of growth created a near suspension in 2005 when the number of FHA reverse mortgage loans began to near a statutory volume cap on the number of reverse mortgages that FHA could insure. In response, an increase in the amount of HECM loans was provided in the Emergency Supplemental Appropriation for Defense, the Global War on Terror and Tsunami Relief, Fiscal Year 2005. The volume cap was raised from 150,000 to 250,000. Last fall, in the face of a similar concern, the limit was increased to 275,000 in the current continuing resolution.
In 2006, the House approved HR 5121, which included a provision to eliminate the FHA reverse mortgage volume cap. But, this bill was not taken up by the Senate. Thus, in the short run, the statutory cap needs to be kept above the actual number of loans, or HUD will be required under law to suspend the program.
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