Fitzpatrick’s ‘Reverse Mortgage Stabilization Act’ passes House
WASHINGTON, D.C. – June 13, 2013 – (RealEstateRama) — The Reverse Mortgage Stabilization Act of 2013 [HR 2167] – introduced by Congressman Mike Fitzpatrick (PA-8) and Congressman Denny Heck (WA-10) – passed the House Wednesday by a voice vote.
“Reverse mortgages are a constructive and helpful tool to many seniors who want to stay in their own homes,” said Fitzpatrick. “By giving seniors access to the built-up capital in their home without having to sell or move, seniors are afforded the choice to set their retirement on their terms.”
The legislation helps to keep seniors in their homes by stabilizing the popular reverse mortgage program. 10% of all reverse mortgages in Pennsylvania happen in Bucks County.
“People in Bucks County understand that this can be a good program for them,” said Mike Bannon, Director of the Bucks Co. Department of Consumer Protection/Weights and Measures. “To date, we have never had a complaint about reverse mortgages or lenders from any consumers here in Bucks County.”
“A reverse mortgage boosted my ability to think about retiring,” said Robert Ciaccia, 74, of Bristol Township who has taken advantage of the program. “It made me debt free- allowed me to pay off loans and be able to buy a motor home. For me it’s a win-win situation; my wife and I are really happy with it.”
The reverse mortgage loan program, referred to as HECM, allows senior citizens to borrow money upfront or on monthly draws at attractive rates against the equity in their home, without having to make ongoing principal and loan repayments. The loan is repaid when the home is sold. Without this tool, many retirees on a fixed income would not be able to stay in their home, and others might turn to loan options at much higher rates and fees – possibly with predatory loan characteristics.
HECM, run by the Federal Housing Authority, is given increased protections through Fitzpatrick’s bill while reforming the program to avoid losses which can threaten the program’s long-term viability.
“The passage of this bill gives HUD the tools it needs to provide timely and appropriate adjustments to the HECM program to ensure that reverse mortgages are still an option for older Americans- while at the same time ensuring the sustainability and solvency of the FHA ” added Fitzpatrick.
The legislation requires that any changes to Reverse Mortgage rules that would be made using authority granted by the act must be done to improve the fiscal safety and soundness of the program. According testimony from HUD Secretary Shaun Donavan, The Reverse Mortgage Stabilization Act of 2013 makes way for the following reforms:
– Performs a financial assessment of borrowers as a basis for loan approval and determining the suitability of various HECM products to protect consumers from acquiring loans not fit for them
– Establishes a tax and insurance set-aside where necessary to pay taxes and insurance on the mortgaged property to avoid defaults otherwise resulting from nonpayment of taxes and insurance
– Limits the draw at origination to mandatory obligations (i.e. closing costs, mortgage liens and federal debt), providing greater flexibility in addressing the individual needs of borrowers than the across-the-board reductions to principal limit factors described above, while still protecting the Fund from losses on loans where the maximum loan amount is drawn up-front
Congressman Mike Fitzpatrick is serving his third term in the U.S. House of Representatives. He represents Pennsylvania’s 8th district which includes all of Bucks County as well as a portion of Montgomery County. He serves as the Vice Chairman of the House Financial Services Subcommittee on Oversight and Investigations.
Source: Michael Fitzpatrick