Robert Menendez

US Senator for New Jersey
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Menendez Introduces Bill to Help Seniors Age-In-Place While Saving Taxpayers Billions

Legislation aims to save FHA’S popular Home Equity Conversion Mortgage (HECM) program

March 7, 2013

WASHINGTON – U. S. Senator Robert Menendez (D-NJ) yesterday introduced a bill that would allow the Federal Housing Administration (FHA) to implement much-needed reforms to the Home Equity Conversion Mortgage (HECM) program. The HECM helps seniors over the age of 62 to tap into the wealth in their homes without having to sell them or take on the burden of monthly payments.  Recently, the U.S. Department of Housing and Urban Development (HUD) has speculated that under its current authority and market conditions, the HECM program could cease to exist before the year’s end without legislative intervention.

“Thanks to this critical program, New Jersey seniors have had the chance to remain in their homes and age with dignity. And 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. “HUD has made some changes to help keep the program afloat, but their hands are tied. I urge my colleagues to pass my bill immediately so HUD can make additional, necessary reforms to keep the program alive, while also reducing taxpayer liabilities by billions of dollars over the coming decade.”

Due to recent declines in home prices and the inability of many seniors to keep up with the rising costs of taxes and insurance, the number of borrowers facing foreclosure has grown in the last several years. Because HUD insures these loans for lenders, the increasing cost to taxpayers has also grown, potentially forcing HUD to consider scrapping the popular program. 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.

Peter Bell, President and CEO of the National Reverse Mortgage Lenders Association, highlighted this point in recent testimony before the Senate Banking Committee, stating:

“Changes to many aspects of the HECM program must be made in accordance with the Federal Administrative Procedures Act and generally take up to two years to be implemented,” Bell said. “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.”

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 and senior borrowers represented by the Coalition for Independent Seniors.

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