From his perch on the U.S. Senate Special Committee on Aging, U.S. Sen. Marco Rubio, R-Fla., urged the Trump administration to be careful as it reforms the reverse mortgage process.
On Wednesday, Rubio paired up with U.S. Sen. Catherine Cortez Masto, D-Nev., to send a letter to U.S. Department of Housing and Urban Development (HUD) Sec. Ben Carson and Office of Management and Budget (OMB) Director Mick Mulvaney asking the Trump administration to keep protections in place for reverse mortgages, questioning some vague language included in the administration’s proposal to cut the HUD budget. Under the Trump administration’s proposal, the cap for reverse mortgages would be lifted though the senators asked if surviving spouses would lose protections under the proposal.
“We write to request additional information about a provision in the Appendix of the president’s fiscal year 2018 (FY) budget regarding existing policy to keep seniors in their homes after the death of their spouse,” Rubio and Cortez Masto wrote. “The Federal Housing Administration (FHA) provides insurance under the Home Equity Conversion Mortgage (HECM) program, known to most Americans as ‘reverse mortgages.’ While reverse mortgages can provide an important source of financial security for seniors by allowing them to tap the value of their home and age-in-place, they have also raised a number of concerns. One such concern arising in recent years relates to what happens when a homeowner dies, and is survived by a spouse that was not an original borrower on the reverse mortgage. Under previous HECM rules, upon the death (or move-out) of the original borrower, the reverse mortgage loan became immediately due, meaning that surviving spouse had to either pay the loan in full, or face eviction.
“This loophole compounded the stress faced by widows and widowers at a time when they were already grieving the loss of their spouse,” the senators continued. “One news article from 2015, for example, documented the story of a Nevada widow surviving on a fixed income, who was faced with possible foreclosure after the death of her husband. Florida, home to the largest percentage of seniors in the country and countless retirement communities, has experienced similar cases. In light of harrowing stories like this, the Department of Housing and Urban Development (HUD) has, in the last few years, taken action to reform the HECM program, protect consumers, and shield taxpayers from the risk posed to the FHA’s insurance fund.
“It appears that the president’s FY 2018 budget seeks to make a change to the reverse mortgage program,” the senators added. “Namely, Section 223 in the ‘General Provisions’ portion of the HUD budget seeks to amend language in the National Housing Act pertaining to safeguards which protect widows and widowers from displacement. Given the gravity of potential changes to this law, we therefore request a written response outlining the rationale underlying this proposed change. We also urge that you continue to ensure that widows do not face eviction in these circumstances.”
The National Reverse Mortgage Lenders Association (NRMLA) has praised the Trump administration’s proposal, insisting it will help seniors continue to enjoy the benefits of reverse mortgages.
Peter Bell, the president and CEO of the NRMLA, praised the Trump proposal when it was released last week.
“The president’s FY 2018 budget and HUD’s accompanying press release reaffirm a national commitment to FHA’s HECM program, which has benefited more than one million senior households since it was implemented nearly 30 years ago,” Bell said. “While we are still analyzing the budget projections and underlying calculations that went into these numbers, we’re pleased that HUD used this opportunity to underscore significant programmatic improvements that reduce risk to the MMI fund and ensure responsible lending to seniors.”
The Trump administration’s proposal’s impact on reverse mortgages has also been praised by Reverse Mortgage Daily.