This is a budget proposal. HUD is being overruled by POTUS's OMB. It is part of a massive 1.56 trillion dollar budget request.

If this part of the budget is passed as is, it will start on 10/1/2010, I expect no appropriation will be made and the actual provision in the budget will be much more punitive.

Does anyone have any idea when the MIP increase and the principal limit decrease will take place (Date)???

Please see my response below.

Again, I sure hope NRMLA and its lobbyists will be able to convince HUD that these changes will do nothing but punish seniors. Why is that story not being told?

Please see my response below. We lost on the last budget request. I am afraid we will lose again.

It is odd that while no Democratic President or administration created HECMs, it is a Democratic President, his Administration, and a Democratic controlled Congress which are determined to irreparably damage it. It is hard to imagine why some industry leaders publicly keep making the same ridiculous claim that it is only Republicans that are bent on harming the HECM program.

It is not HUD that is initiating these changes.

Wow! A Principal Limit cut was expected as Meg Burns mentioned at NRMLA last November, but a 150% increase the monthly MIP? Really?

This is odd since conforming FHA loans usually only charge .55% MIP. If, this budget and PLF cuts & MIP increase are passed in their present form here's what to expect...

1. Further damage to the reputation of the HECM as a loan that is "too expensive". We've been working hard to improve the public's perception of the program. Jacking up the monthly MIP will not help matters.

2. Fewer referrals from professionals. Those financial professionals who saw the value of a RM may now think twice with the extreme expense of monthly MIP compounding over time.

3. Fewer loans. The amortization schedule is a hard sell already. Add in the monthly MIP and it gets real ugly.

4. Fewer qualified/interested seniors. PLF cuts, increased MIP will hurt those who really want and need the program. Add this to coming interest rate increases and home values that have yet to reach bottom....

I'm disgusted that seniors who per capita did not create this mortgage mess are being saddled with some of the harshest insurance increases and benefit reductions in recent history.

Eric,

Most of us, like you, read Darryl Hicks's remarks late yesterday also.

What is surprising is that the Administration decided to touch MIP which Meg Burns in November told us would not happen.

What is important about this announcement is what is not said. Is the reduction of principal limits that is being bandied around, based on mandate or the calculated result of a higher MIP rate? An increase in MIP of 75 basis points is like an increase in the interest rate of 75 basis points as to its impact on principal limit factors. If on top of the indirect effect of raising the MIP on the principal limit factors, HUD is saying that the Administration is mandating a further mandated reduction of some “single digit” percentage, will the new total of the direct and indirect reduction exceed the present 10% reduction?

Then what will happen if Congress decides not to fund the requested subsidy AGAIN? How much more will principal limit factors be forced down? Hold onto your hats; principal limit factors are under attack now in everyway.

Why is this Administration so ruthlessly attacking the HECM program?

This is what I heard yesterday:

For the reverse mortgage business, the highlights of HUD’s proposed budget for fiscal year 2011 includes a subsidy of $250 million for the MMI/HECM fund, an increase in the ongoing annual Mortgage Insurance Premium (MIP) from .5% to 1.25% and a low-to-mid single digit cut in the principal loan limit with the higher end affecting older borrowers. Just a few hours after President Barack Obama released his proposed fiscal 2011 budget today, HUD Secretary Shaun Donovan and his senior staff presented a briefing on their department’s budget to a gathering of 150 or so in the Brooke-Mondale Auditorium at HUD’s headquarters in southwest Washington.
The only references to the HECM program in the printed budget are the subsidy and references in the budget’s written report entitled Investing in People and Places to the need to strengthen the FHA capital reserves and better position the FHA to manage risk. During his presentation, Secretary Donovan reported there would be long term reforms in the reverse mortgage program down the line, but that the $250 million subsidy “is a reaction to last year’s adjustments to make sure the program does not limit its availability to seniors.” Donovan also reported that in their first year in office, this HUD staff withdrew approval of more than 280 lenders. In private conversation following the session, FHA commissioner David Stevens confirmed the increase in the MIP and the cut in the principal loan limit. He also warned that the subsidy would still need to be approved by Congress.
The budget also includes $88 million for all FHA program counseling. Stevens assured us he would provide a breakdown of just how much of that is attached to the HECM program.
This is the Scary Part:

“an increase in the ongoing annual Mortgage Insurance Premium (MIP) from .5% to 1.25% and a low-to-mid single digit cut in the principal loan limit with the higher end affecting older borrowers”.

This administration has absolutely no regard for the generation that help make this country Great. Since they are no longer in the work force and not producing taxable income for them to use at "THEIR" discretion seniors are getting the little or no help, very sad
Eric

Dream on Matt.....just try and keep the FAT LADY out of those dreams?!?!?!? SAD is an understatement!!!

Wow! If, and I mean if this budget is passed as proposed here's what we will have when the new federal fiscal year begins...

1. A 140% in monthly MIP for seniors who wish to utilize a HECM from .50 50 1.25%, while borrowers obtaining a standard conforming FHA loan pay .55% monthly MIP.

2. Further damage and ammunition to those who say reverse mortgages are "too expensive". Yup, a 140% increase in monthly MIP will help the public perception of our program.

3. Former supporters of the HECM reconsidering based on the massive increase in costs of insurance further impacting cost vs. benefit.

4. A perfect storm: Interest rates that will increase, expected rates that already are increasing, home values that may fall further and reduced benefits for seniors desiring a HECM.

I am deeply concerned the combination of these massive cost increases, PLF reductions and market conditions will have for our clients and our businesses.

The co-ops are still orphans in getting a reverse mortgage. We just keep getting false hope that we are getting it--have been stalled for over a year already. We want to know WHEN it is coming.

With this new reduction in principal limits and the change in ongoing MI, I think the industry will be lucky to endorse 80,000 HECMs in 2010. How many HECM for purchase loans can you expect to close at the new LTVs? What a drastic move by HUD in such a short period of time.

It's time for a proprietary product modeled after the HECM that utilizes PMI and takes into consideration regional appreciation rates. It's okay to dream, right?

The administration expects 120,000 units for 2010? After January's total of 7,600 we are on a pace for only 90,000 or so. January's total was the lowest in the past 3 years. January has averaged about 9,500 over that time.

"National Mortgage News is reporting that the administration is proposing changes to the Home Equity Mortgage Conversion program that will raise premiums and “slightly lower loan limits.” Once again, the Obama administration (via HUD) is turning its back on seniors. I sure hope NRMLA can be an effective voice of reason on this issue!

You're correct, updated. I did email the OMB as well, I'll keep you posted.

As usual you are doing your typical great job. Thank you for your efforts on behalf of readers.

Admin,

Since the Budget is the product of OMB, perhaps OMB is a better place to find out what is being proposed.

Further, it is important to note that it was not the Administration which rejected any subsidy to the HECM program for the fiscal year ending 9/30/2010; it was Congress, specifically the U.S. House of Representatives. It was the Administration that created the false impression that there was any need for a positive credit subsidy to begin with.

Does anyone believe that we will get any subsidy within this oversized budget? If wishes were horses, then even beggars (but probably not HECM borrowers if this Administration and Congress have their way) would ride.

Here we go again. What percentage of home appreciation did the Administration drum up this time? There is a reason why HUD is a department of the executive branch and not a direct function of it. It seems that like the decisions of the Supreme Court, this White House wants its dictates stamp marked into the Budget; the bad thing in this case is that it can and as a result, future HECM borrowers suffer loss. What a sad, sad, sad state of affairs.