First-year Congressman Denny Heck of Olympia pushed his first piece of legislation through the U.S. House on Wednesday, passing a reverse-mortgage reform bill on a voice vote. The measure, H.R. 2167, now goes to the U.S. Senate for consideration.
Heck, a Democrat representing Washington’s new 10th Congressional District, sponsored the Reverse Mortgage Stabilization Act at the behest of the Federal Housing Administration, which reports a higher rate of underwater mortgages in its reverse-mortgage portfolio than its holdings overall.
Heck said the Reverse Mortgage Stabilization Act lets FHA make rule changes quickly by letter to mortgagees and that it’ll allow speedier action than waiting for a rule making process that could take 18 months in the best case and up to 36 months in the worst.
In a short floor speech (C-SPAN coverage of the brief debate and vote is here, starting at about 30:00), Heck said the bill is a “two-fer” that benefits borrowers and the financial stability of the FHA. The benefit for borrowers is that lenders would need to do financial assessments upfront for borrowers to make sure the reverse mortgage – which let retirees tap equity in their homes to pay bills – is suitable for the borrower.
This might lead to more upfront fees and a requirement for escrow deposits, but the system would be safer for all, according to Heck.
“The VA uses this tool to underwrite reverse mortgages,” Heck told colleagues. “How much of a problem does the VA have with reverse mortgages? Zero.’’
Rep. Michael Fitzpatrick, a Pennsylvania Republican and chairman of a House finance subcommittee on investigations, co-sponsored the legislation. He said government must improvement the fiscal soundness of the FHA program, which has drawn bipartisan concern, as well as the safety of reverse mortgages which he wants to ensure is an option for seniors.
The measure now moves on to the Senate where Heck’s aides say a similar bill has been advanced by New Jersey Sen. Robert Menendez. Heck expects to work with the Democrat to get a measure passed and sent to President Obama for signing, aides said.