Letter From Peter Bell, President of National Reverse Mortgage Lenders Association, regarding the Economic Stimulus Bill

As I’m sure you’ve probably read, last week Congress passed an Economic Stimulus bill, H.R. 5140 that includes a temporary increase in loan limits for Fannie Mae, Freddie Mac and FHA to 125% of area median home prices, or a maximum of $729,750 – for the remainder of this year only. The bill will be signed into law by the President sometime this week. Please be advised that the bill specifically excludes HECM from the new temporary FHA loan limits.

We tried working many angles to have the larger loan limits apply to HECM, but were unable to accomplish this. The basic problem is, as you know from previous NRMLA legislative updates, there are a few members of the Senate who are vociferously opposed to expansion of the HECM program. Particularly outspoken among such opponents is Sen. Tom Coburn, a fiscally conservative Republican from Oklahoma, who is vehemently opposed to expanding this government program because he believes that FHA will “crowd out” other private sector reverse mortgages. At the very least, Coburn feels that Congress should wait until the GAO report on the HECM program called for in the FHA Modernization bill is completed before taking any action on the program. (For background on Coburn’s concerns, I suggest you read the Congressional Record or view the video of floor action from when the FHA Modernization bill was debated and passed in late December.)

The Economic Stimulus package was moved through Congress with tremendous speed and completed within three weeks – a highly unusual accomplishment in this Congress. There was a general consensus among many members of Congress, White House staff and the Treasury Secretary to try to pass a narrowly focused bill that avoided any provisions that might slow it down. Indeed, the Senate in the end backed down from including several additional items that it had considered including and instead passed a version very similar to the House bill with only a few additional items. Because Sen. Coburn could have slowed down the stimulus package if it included increased HECM limits, a decision was made to specifically exclude Sec. 255 (the section of the US Housing Act authorizing HECMs) from the stimulus package.

Where this leaves us then, is that we are now back to looking to the FHA Modernization bill to provide us with a single national loan limit (or higher loan limits) for HECMs, along with the several other HECM provisions in that bill that we have previously reported (elimination of the authorization cap, HECM for home purchase, HECM for coops, the GAO study and the new limitation on origination fees.)

There are also a few questions raised by passage of the Economic Stimulus bill. First of all, will the new temporary loan limits for Fannie Mae be applicable to HomeKeeper reverse mortgages? Secondly, since the language in the pending FHA Modernization bills would create a single national loan limit for HECMs at the GSE loan limit, which at the time of enactment was $417,000 nationwide, would we now use the higher temporary limits or would $417,000 be our cap? We are trying to obtain answers to both of these questions and will report to NRMLA members as soon as we know.

Yours sincerely,
Peter H. Bell, President
National Reverse Mortgage Lenders Association

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