September 25, 2019 — Testimony

Congress has an important role in overseeing the U.S. Department of Housing and Urban Development’s (HUD) administration of the Federal Housing Administration’s (FHA) reverse mortgage program. Congress authorized HUD to create the HECM program to encourage lenders to make reverse mortgage loans that would better enable seniors to tap into their home equity and age in place. This product often is able to make a huge difference in the lives of seniors— providing personal and financial stability. Unfortunately, a significant number of reverse mortgage loans are now in foreclosure – putting elderly borrowers at risk of eviction and homelessness.

This testimony provides a brief overview of the problems facing reverse mortgage borrowers while focusing on improvements that could be made to reduce the number of vulnerable seniors at risk of losing their homes. The central point is that reverse mortgages provide an important safety net for older adults to allow them to remain stable in their homes. The reverse mortgage foreclosure crisis we are facing now was caused by problematic origination practices that largely have been addressed for new HECM loans through HUD’s requirement that lenders evaluate the borrower’s ability to pay property charges before making the loan (the Financial Assessment requirement) and its 2014 policy that creates some protections for non-borrowing spouses. However, in order to stem the tide of HECM foreclosures of existing loans and further prevent such a crisis from reoccurring, the following steps are needed: