Collins, the top Republican on the Senate Appropriations panel overseeing mortgages, is concerned about the risk senior citizens face when they take equity out of their homes to pay for living expenses. “We see these ads on television and it sounds like it’s the best thing since sliced bread, and yet I’m hearing that there are a lot of problems,” she said.
A reverse mortgage lender may employ a former GOP senator as corporate pitchman, but there’s no love lost on Capitol Hill.
President Barack Obama’s fiscal 2014 Housing and Urban Development budget includes a warning about a nearly $1 billion bailout for the Federal Housing Administration from the Treasury.
HUD Secretary Shaun Donovan blamed that deficit squarely on issues with government-insured reverse mortgages, which HUD refers to as Home Equity Conversion Mortgages, or HECMs. That’s an acronym that Susan Collins, R-Maine, conceded she couldn’t really pronounce.
At a routine budget hearing April 11, Collins, the ranking member on the Appropriations Subcommittee on Transportation, Housing and Urban Development, highlighted her worries about risks from the mortgages, in which seniors take equity out of their homes to pay for living expenses.
“We see these ads on television and it sounds like it’s the best thing since sliced bread, and yet I’m hearing that there are a lot of problems,” Collins said.
The quip about TV ads was perhaps more amusing than Collins intended. Turn on a TV at any hour of the day or night and you might see a commercial featuring actor and former Sen. Fred Thompson, R-Tenn., promoting reverse mortgage offerings from American Advisors Group. Thompson has worked as a paid spokesman for the company since 2010.
Donovan said April 11 that the administration was proposing to overhaul the HECM program but needed legislative action outside the budget to do so.
“If you just took out the reverse-mortgage loans from the FHA, we would be in a positive $4 billion position,” Donovan said in response to a question from Subcommittee Chairwoman Patty Murray, D-Wash. “Frankly the program needs reforms and unfortunately we do not have the authority to implement those reforms without full notice and comment rule-making.”
Collins, who also serves as the top Republican on the Senate Aging Committee, noted that her concerns extended beyond the fiscal health of the program to seniors who may not understand terms and conditions associated with reverse mortgages, noting the comments of an engaged constituent.
“A retired mortgage banker in Maine has repeatedly contacted me to express her well-informed view that in many cases our seniors are getting into these reverse mortgages and they’re turning out to be a disaster for them,” she said. “I’m also concerned about the impact on seniors of the widespread or the wider-spread use of reverse mortgages.”