NRMLA President Peter Bell testified in front of the House Subcommittee on Housing and Community Development today as part of a panel of witnesses on the future of the FHA. While Commissioner Stevens’ statements were written up in the New York Times, Bell’s comments provided a number of interesting anecdotes on the state of the reverse mortgage industry.
Bell talked about the risks to both borrowers and lenders. Borrowers risks include finding out they do not have enough money to remain in the home due to property taxes and insurance. These issues, which we have covered extensively in the past few weeks, only effect 2% of borrowers, and efforts are underway to help mitigate those risks. Lenders risks include being stuck funding a loan that is unable to get a certified by HUD. HUD is reducing this risk, by decreasing the Principle Limit Factors last week, and eliminating the need for a credit subsidy to the reverse mortgage program.
However, Bell’s main purpose in his testimony appeared to be to convince the House Subcommittee to extend the current reverse mortgage limits and to ultimately return to the prior Principle Limit Factors. HECMs have had a net gain of 7 billion dollars in the course of the program, and Bell argues that reverse mortgages have not played a role in the FHA’s recent capital reserve problems. Reverse mortgages are expected to operate on a break even or better basis in the future.
Furthermore, recent changes to the program will impede the ability of seniors to get a reverse mortgage. Over 20% of reverse mortgage borrowers in the last year would not have qualified if the Principle Limit Factors had been reduced to their current levels when they applied for the loan. New technology has reduced costs for lenders, and Bell maintains that the numbers used by the Office of Management and Budget (OMB) are not realistic, since the average lifetime of a reverse mortgage loan is 7 years regardless of the age of the borrower. Older borrowers average the same length of time with a reverse mortgage as younger borrowers. Bell was passionate that the reverse mortgage program has been self-sustaining and will continue to operate as such.