The PATH (Act) to Hell is Paved With Good Intentions...

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The PATH (Act) to Hell is Paved With Good Intentions...

It's not uncommon for a piece of legislation, which hopes to fix one problem, can create another. The Protecting American Taxpayers and Homeowners Act is just one of the most recent, especially where reverse mortgages are concerned.

The PATH Act, introduced by the House Financial Services Committee on July 18, seeks to:

  1. Phase out Fannie Mae and Freddie Mac by the next five years and end their $200 billion taxpayer-funded bailout
  2. Increase competition by ending the dominion of the Federal Housing Administration  in the housing finance market
  3. Give consumers more mortgage program choices better suited to their needs

While this is all good, the last piece of legislation is the most troubling for me:

  • Repeal the FHA's Home Equity Conversion Mortgage two years after the passage of the PATH Act

I agree that more competition and choices are helpful to the consumer, and, by extension, the economy, but the repeal of the FHA's reverse mortgage can mean disaster for older Americans hoping to apply for a reverse mortgage.

Up until now, the reverse mortgage has been one of the few options available to homeowners 62 years of age and older, who live in their primary residence and have enough equity in their home. The instability of Social Security and 401Ks, partnered with rising costs of living and unexpected costs--on a fixed income--have put a strain on Americans looking to retire comfortably.

If the PATH Act repeals the reverse mortgage, consumers looking for another source of supplementary income will either have to continue working part-time during retirement or retire later in life.

The fact that the bill managed to pass in the House Of Representatives on July 24 (according to an article in Reverse Mortgage Daily) a signifies a strong belief in the bill's ability to create a stable housing reform, despite out-right opposition by some panelists, and an overwhelming agreement that the bill itself needs to undergo various changes before passing into law.

The repeal of the reverse mortgage comes at a troubling time, considering the FHA has been working on making reforms to the current reverse mortgage via stricter consumer guidelines or eliminating another reverse mortgage product like they did with the Standard Fixed-Rate. 

It's troubling to see the lack of House confidence in the reverse mortgage, despite all the good it's done for older Americans hoping to escape impoverishment.

I question the motives of the PATH Act and how beneficial it can be for older generations. It seems everywhere I look, another entity is attacking the reverse mortgage without considering the benefits of the program.

Interested in a reverse mortgage programGive PS Financial Services a call at (888) 845-6630 or email us at We do not pressure those who inquire, we're just here to help. 

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Information and content in this blog is original to Phil Stevenson

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Copyright © 2013 by Phil Stevenson & PS Financial Services, LLC

Comments (11)

Lenn Harley
Lenn Harley,, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Well, shucks.

Every plan that I had 8 years ago has been thwarted in one way or another. 

In 2005/6, I built a lovely home in Loudoun County VA.  My plan was to own for 3/4 years, do a reverse mortgage.

Loudoun because it was growing nicely and home prices were stable and increaing.  Then everything came crashing down and I found myself in a home with 2/3 market value.

So, I paid and paid and finally got the loan modified to a point where I was able to see daylight ahead.

So, now that the loan is modified and I can see equity growing, the government is going to snatch the reverse mortgage our of my hands.

I shoulda stayed in Bethesda in the pallution and noise 8 years ago. 

Jul 27, 2013 08:12 AM
Steven Cook
No Longer Processing Mortgages. - Tacoma, WA

Phil -- they probably just see this as natural outcome of moving FHA out of dominance in mortgage field.  Based on what I am seeing as result of PMI changes, FHA may have taken itself out of dominance in the purchase field (I just compared a conventional & FHA minimum down loan - and though the FHA had a 1% lower stated rate the APR was .3% higher for the FHA vs. the conventional.) 

I agree that it would help if Congress could leave something alone long enough to determine if it is working or not before putting their oar back in the water.

Jul 27, 2013 09:27 AM
Tammy Lankford,
Lane Realty Eatonton, GA Lake Sinclair, Milledgeville, 706-485-9668 - Eatonton, GA
Broker GA Lake Sinclair/Eatonton/Milledgeville

My market is so many second homes that reverse mortgages aren't done much at all.  But frankly the government just needs to butt out of the banking business period.

Jul 27, 2013 09:33 AM
Chuck Mixon
The Keyes Company - Cutler Bay, FL
Cutler Bay Specialist, GRI, CDPE, BPOR

I not sure the they can remove Fannie Mae or Freddi Mac. These programs do a great service to getting home that the Banks can't sell back into the hands able and willing buyers. Just today we took on over and it was like an Open House. All the neighbors were coming up to the door asking if we were the new owner. After explaining that were the new agents for Fannie Mae, the stories start to come in on how they had made offers and the bank did not reply. This is not the first time we have heard this, it is common. 

Jul 27, 2013 11:40 AM
Chris Miller Nevada Land with Water Rights
Vegas Grand Realty and Property Management - Mesquite, NV
Land with Water Rights For Sale

It is high time we get the secondary mortgage money market back into the hands of private investors. There is no reason for our government to be supporting or subsidizing our industry or the banks. Smaller less encumbered government is critical to future generations. If there is a viable market for reverse mortgages, the open free market will create the products to meet that market. Many of the reverse mortgage products being offered today have so many hooks and high costs, they are not a very good deal for most seniors anyway.

Jul 27, 2013 11:24 PM
Edward Gilmartin
CRE - Boston, MA

I would merge fannie and lots of bureaucrats....tighten lending standards. I have my doubts about reverse mortgages...

Jul 28, 2013 12:18 AM
Jeanne Dufort
Coldwell Banker Lake Country - Madison, GA
Madison and Lake Oconee GA

Reverse mortgages serve a specific and (often) vulnerable population. I would rather keep the current program in place than turn it over to the free market.  Re-blogged.

Jul 28, 2013 12:31 AM
Gerard Gilbers
Higher Authority Markeing - Asheboro, NC
Your Marketing Master

I definitely think that Fannie & Freddie need more oversight and agree that getting rid of them may prove to be more difficult than they think. 

Jul 28, 2013 06:02 AM
Jennifer Ferri
Title Junction, LLC - Fort Myers, FL

So many changes to the lending industry over the past 7 years. Lenders have put the consumers in this spot and now they try to wiggle way out by creating  "new" wyas to protaect them..not so sure. For the older generation, the reverse mortgae is a great option...keep your info coming....

Jul 28, 2013 10:16 AM
Phil Stevenson, CRMP
PS Mortgage Lending 305-791-4874 or 888-845-6630 - Miami, FL
"Mortgage Nerd" in Miami, Florida and Texas

Lenn, it's impossible to determine what's a good fit anymore. It's better do it when you can before you can't anymore.

Steven, me too. It's incredible how little chance they give some programs before they determine it isn't working.

Tammy, I couldn't agree more.

Chuck, it's a double edged sword, frankly.


Jul 29, 2013 12:15 AM
Phil Stevenson, CRMP
PS Mortgage Lending 305-791-4874 or 888-845-6630 - Miami, FL
"Mortgage Nerd" in Miami, Florida and Texas

Chris, reverse mortgages are a great options for some seniors, not all. It's just like renting or buying, it operates on a case by case basis.

Edward, it's about educating yourself and making an informed decision when it comes to reverse mortgage. This is why we do MANDATORY counseling. We are not trying to trick people, we want them to informed before choosing a reverse mortgage.

Jeanne, most of the vulnerability comes from lack of education. I'm not in the habit of offering deals without going over it with my clients. Even before that, like I told Edward, they must go to mandatory counseling beforehand so they have all the information available at hand.

Gerard, I agree. Better management skills would help a lot.

Jennifer, thanks for your support. The last seven years have been crucial for the housing market so it's goo to keep updated.

Jul 29, 2013 12:21 AM