WASHINGTON, D.C. – July 31, 2013 – (RealEstateRama) — Congressman Mike Fitzpatrick (PA-8) released the following statement following the Senate’s passage of his Reverse Mortgage Stabilization Act of 2013 [HR 2167]:
“Last night the Senate, by Unanimous Consent, passed a bill I introduced with Representative Denny Heck (D-WA) – the ‘Reverse Mortgage Stabilization Act.’
Reverse mortgages are a constructive and helpful tool to many seniors who want to stay in their own homes, 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.
This important legislation gives the Department of Housing and Urban Development (HUD) the authority to make needed reforms to the Federal Housing Administration’s reverse mortgage, or HECM, program. These reforms are required by law to improve the safety and soundness of the program. While also protecting the consumer, this legislation improves the fiscal health of the HECM program to ensure reverse mortgages are available to those seniors who can benefit from these products.
A properly underwritten and responsible reverse mortgage provides seniors with access to capital in their retirement which can help maintain or improve their quality of life. Ten percent of all reverse mortgages in Pennsylvania occur in Bucks County, where seniors tell me a reverse mortgage improved their retirement years, giving them financial stability and peace of mind they would not have had otherwise. I’m proud to have helped maintain this program as an option for many of them.”
HECM is given increased protections through Fitzpatrick’s bill while reforming the program to avoid losses which can threaten the long-term viability of the program.
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 to testimony from HUD Secretary Shaun Donavan, the Reverse Mortgage Stabilization Act 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
The bill will now head to the president’s desk to be signed into law.
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 and a portion of Montgomery County. He serves as the Vice Chairman of the House Financial Services Subcommittee on Oversight and Investigations.