U.S. House passes bill to
relieve senior citizen expenses
• Case, a cosponsor, says it will assist seniors with
housing and related expenses
Washington,
D.C.—Congressman Ed Case (2nd District, Hawaii) said the
U.S. House today passed a bill to enable more senior
citizens to utilize their home equity toward health and
other expenses common to seniors.
Case is a cosponsor of
the bill, H.R. 5121, the Expanding American
Homeownership Act of 2006. Among other provisions, the
bill facilitates the issuance of reverse mortgages, an
increasingly popular product with seniors. Reverse
mortgages allow homeowners to withdraw home equity for
expenses while deferring loan repayment until the owner
dies or the home is sold.
“The number of reverse
mortgages insured by the federal government nationwide
more than doubled from 18,000 in 2003 to 43,000 in 2005,
as more and more seniors on fixed incomes have found
these loans to be extremely helpful in keeping up with
medical costs, home improvement costs, property taxes
and other expenses,” said Case. “As of last April, a
total of about 200,000 such loans have been insured.
This bill will remove the statutory cap that has limited
the Federal Housing Administration (FHA) to insuring
250,000 reverse mortgages—a level that will be reached
next year.”
The FHA’s reverse
mortgage program enables homeowners who are at least 62
years of age to withdraw some of the equity in their
home in the form of monthly payments, in a lump sum, or
through a line of credit. This allows seniors to obtain
a loan against their homes that does not have to be paid
back for as long as they live in the home. Under current
law, FHA is limited to a total of 250,000 such loans
which cannot be used to buy another home.
By lifting the cap on
reverse mortgages, the number of homeowners who could
obtain loan insurance under the FHA’s reverse mortgage
program (the Home Equity Conversion Mortgage, or HECM)
would increase. The Congressional Budget Office (CBO)
says there are over 17 million households with owners
aged 65 or older, and as more consumers become aware of
reverse mortgages, more households will become eligible
for the program. In addition, there is relatively little
private availability of these loans, heightening FHA’s
importance.
“This legislation would
make it possible for the FHA to guarantee an additional
80,000 loans valued at about $20 billion in 2007. This
would be in addition to 20,000 loans valued at $5
billion that the CBO estimates would be insured during
the first quarter of fiscal year 2007,” said Case.
The bill also would set a
single nationwide loan limit for the reverse mortgage
program and allow borrowers to use the loans to purchase
a new home. “This will help the increasing number of
seniors who are searching for new housing within senior
communities,” said Case.
The CBO estimates that
the bill would save the federal government $2.3 billion
over the 2007-2011 period. The saving would stem from
increasing the number of homeowners who could obtain
loan insurance under the HECM program and under FHA’s
single-family loan insurance program. The increased
collections would offset the cost of the program because
the fees paid by borrowers generally exceed the cost of
expected defaults, according to the GAO. As a result,
enactment of the bill would not affect direct spending
or revenues.
“For Hawaii, we still
have remaining issues in assuring that this and other
home financing is fully available, especially to the
rural parts of our state. However, this is a fiscally
responsible bill that provides a good step in the right
direction for our seniors,” said Case.
Contact:
Esther Kia‘aina 202-225-4906
(Washington, D.C.)
Randy Obata, 808-541-1986
(Honolulu)
Release
Number: 2005-66 |
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