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:
- Phase out Fannie Mae and Freddie Mac by the next five years and end their $200 billion taxpayer-funded bailout
- Increase competition by ending the dominion of the Federal Housing Administration in the housing finance market
- 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.