Condo Media - August 2013 - 14

N e w s
C A I

House of Representatives
Tackles Homeownership

ecently, the United States
Congress has again begun
taking a stronger look at housing reform on their legislative
agenda. The U.S. House of Representatives has unanimously cleared legislation permitting the Federal Housing Administration (FHA) to make
changes to the popular Home Equity Conversion Mortgage (HECM)
program. More commonly known as
reverse mortgages, HECM loans allow
senior citizens to access equity in their
homes.
H.R. 2167, the “Reverse Mortgage
Stabilization Act of 2013,” was spearheaded in the House of Representatives by Reps. Denny Heck (D-WA)
and Patrick Fitzgerald (R-PA). The
unanimous vote in the House reflects
broad concerns about FHA’s financial
health. Community associations have
a direct stake in reforms to FHA’s
reverse mortgage program. While
homeowners are not required to make
payments under the terms of a reverse
mortgage, homeowners do remain
responsible for taxes, insurance, and
association assessments. When these
items become delinquent, FHA faces
significant losses as municipalities,
lenders, and associations seek to enforce homeowner obligations.

FHA Financial
Condition Worsened

According to an independent audit
of FHA finances, losses on reverse
mortgages have placed a severe strain
on FHA’s financial condition. Auditors
found that the main insurance fund
backstopping FHA reverse mortgages
has an economic value of negative
$5.25 billion.
More recently, President Obama’s
2014 budget proposal estimates FHA
14

Condo Media • August 2013

may require as much as $943 million
in direct taxpayer assistance to bolster
reserves against future losses. The
FHA has never required direct taxpayer assistance to fund claim payments
or to increase reserves in its 80-year
history.

The FHA is already clamping down
on its reverse mortgage offerings,
suspending one program and limiting
the maximum amount of equity homeowners may withdraw in a second. If
H.R. 2167 becomes law, FHA will
be granted additional administrative
authority to manage and reform its
reverse mortgage program.
One key reform under consideration
by FHA is a requirement that homeowners demonstrate an ability to pay
monthly housing obligations such as
taxes, insurance, and association assessments. In some cases, FHA may require
that lenders establish the functional
equivalent of escrow accounts to ensure
homeowners have sufficient funds to
pay these monthly housing obligations.

Senate to Debate

H.R. 2167 will be forwarded to the
U.S. Senate for debate and consideration. The Senate Banking Committee
scheduled a hearing on proposals to
reform FHA’s reverse mortgage program. CAI will continue to monitor
congressional action to reform FHA’s
reverse mortgage program and will
provide member updates as the legislative process continues.
In an attempt to guide the House in
its agenda, on June 18, CAI submitted
a report to the U.S. House Financial
Services Committee Subcommittee
on Financial Institutions & Consumer
Credit called, “Examining How the
Dodd-Frank Act Hampers Home
Ownership.”
The Subcommittee’s hearing
focused on the Consumer Financial Protection Bureau’s Qualified
Mortgage (QM) rule, which implements key mortgage lending reforms required by the Dodd-Frank
Act. The QM rule requires that
mortgage originators reasonably
verify borrowers have the ability to
make payments under the terms of
a mortgage loan before extending
credit. The QM rule also mandates
that terms and conditions of mortgage credit meet minimum consumer protection standards.
CAI supports mortgage lending and securitization reforms that
ensure access to credit on reasonable
terms for Americans who choose
to live in a community association.
Alternatively, CAI strongly opposes
any aspects of new mortgage lending and securitization policies that
treat homeowners choosing to live in
community associations differently.
To read the complete comments,
visit www.caionline.org. CM

http://www.caionline.org

Condo Media - August 2013

Table of Contents for the Digital Edition of Condo Media - August 2013