New reverse mortgage law
On August 9, 2013, President Obama signed the Reverse Mortgage Stabilization Act (HR 2167) in an attempt to revitalize the FHA Home Equity Conversion Mortgage (HECM) Program. This Act amends 12 USCA § 1715z-20 of the National Housing Act by giving the Secretary of Housing and Urban Development (HUD) the authority to make administrative and policy changes to the Federal Housing Administration's (FHA) HECM program without the constraints of a time- consuming formal regulatory process.
Prior to this change, HUD followed a regulatory process which typically took up to 18 months to make an administrative or policy change. During these 18 months, FHA could continue to lose money. The new bill allows HUD to bypass this time-consuming process and issue a notice or mortgagee letter when a change is “necessary to improve the fiscal safety and soundness of the program.” Any administrative or policy change will be effective upon issuance of the notice or mortgagee letter.
FHA's HECM program provides reverse mortgages to those who are 62 years or older and allows elderly borrowers to obtain additional income by borrowing against the equity in their homes. HUD plans to use the new procedures available to them in HR 2167 to add consumer safeguards and improve financial performance of the HECM insurance fund.