In 2011 and 2012, the FHA implemented several changes to the program, taking steps to ensuring it would remain “viable financing option for seniors,” said Henry V. Cunningham, Jr., the president of Cunningham and Company, who represented the Mortgage Bankers Association (MBA).

These changes include the introduction of the HECM Saver, the adjustment of principal limit factors used to determine the maximum claim amount for reverse mortgage loans to make sure the HECM Standard could be self-supporting, and underwriting guidance to address tax and insurance default.

“MBA appreciates that FHA continues to work as a partner with lenders to strengthen the HECM program and to ensure that borrowers are able to meet their financial obligations related to the mortgage,” said Cunningham in his written testimony.

The Department of Housing and Urban Development’s (HUD) secretary, Shaun Donovan, also mentioned the “significant changes” that were made to the program.

“These policy measures have significantly strengthened the HECM program so that it can continue to provide important financial options for seniors without posing unnecessary risks to the MMI (mutual mortgage insurance) Fund,” he said in his testimony.

The FY 2011 Actuarial Report suggests that the MMI Fund will return to its Congressionally mandated capital ratio of at least 2% by 2014, when it is projected to be at 2.17%. This, however, depends strongly on the future performance of the housing market, as Donovan said in his testimony.

On the other hand, the FY 2011 HECM book is actuarially sound, as are future books of business, according to the report, and as Cunningham said, HECMs are “less impacted by near-term economic conditions than the forward mortgages book of business.”

Although the HECM program received a $535 million transfer from capital accounts in 2011, the actuarial report points to the program being able to pay back those funds by 2015, thanks to the changes the FHA implemented, the MBA representative pointed out.

“MBA strongly supports the HECM program and applauds FHA for proactively taking steps to protect a program that is becoming an increasingly important financial option to American seniors,” Cunningham said.

Written by Alyssa Gerace

Reverse mortgage market share volume of the Federal Housing Administration’s overall single-family portfolio dropped to 5.3% from September’s 6.1%, but the program is still accounting for a higher share compared to the last fiscal year’s 4.2%.

HECM endorsement volume declined slightly to 4,653, down 16.8% from September 2011. Compared to the previous fiscal year-over-year data, volume is down 11.9%.

The majority of endorsement volume went to standard traditional reverse mortgage transactions, at 4,055, while HECM Saver volume dipped 35.5% to 347. The percentage of the Saver’s share of the overall HECM program dropped for the first time in several months to 7.46%.

The HECM Purchase program also saw fewer endorsements, down 31.4% from September to 129.

View the FHA Single-Family Outlook for October 2011.

Written by Alyssa Gerace

“Our projections indicate that, as of the end of FY 2011, the HECM portion of the MMI fund has sufficient capital resources to meet its future liabilities and hence will not require support from the overall fund,” the report states. “Expected improvements in house price growth rates and recent increases in mortgage insurance premiums contribute to a steadily increasing economic value of the MMI HECM portfolio from FY 2011 through FY 2018.”

The total economic value of the HECMs in the fund is projected to increase from $1.36 billion in FY 2011 to $10.03 billion in FY 2018.

“The increase in premiums and the HECM Saver both positively impacted FHA’s finances,” said Carol Galante, acting FHA commissioner during a press call on Tuesday. “Also, given additional guidance to lenders on property insurance default we expect to have a positive impact on the fund.”

Galante also noted the pending financial assessment of borrowers that one lender began implementing this week and others are working to put into play.

“We are also looking at longer term guidance with the financial assessment of borrowers that will come into play down the road.”

For the overall MMI Fund, Galante said FHA is working off most of its losses, and that a recent Wall Street Journal article indicating FHA’s financial troubles “got it wrong.”

“The quality of FHA’s business continues to improve significantly,” she said.

Download the report at HUD.gov.

Written by Elizabeth Ecker

According to the projections, HECMs will see an increase to near 88,000 in 2012 from a total of 73,129 in FY 2011. Of the 2011 total, HECM Savers represented 3,828, or 5.2% of the loans.

Written by Elizabeth Ecker

The exam is required to obtain and retain a place on the HUD HECM Counselor Roster, and has not been revised since May 2009. The new revision will continue to include 100 questions, but the number of question in each of four content categories and the questions themselves will change.

Reverse Mortgage Basics; HECM Costs and Benefits; Alternatives to Reverse Mortgages; and HECM Counseling will remain the four content categories, but the new version will include a greater emphasis on HECM Counseling and less emphasis on HECM Costs and Benefits and Reverse Mortgage Basics.

The current exam will be offered through November 27, 2011.

Find out more about the changes to the exam here.

Written by Elizabeth Ecker

“It’s still a very robust program for [the Department of Housing and Urban Development],” Galante told attendees of the National Reverse Mortgage Lenders Association convention in Boston this week, stressing the need for attention to the product. “Because it started as a sleepy little pilot program, frankly, it hasn’t had a lot of attention paid to it inside the HUD building.”

Noting the importance of sustaining HECMs during uncharted economic times relative to the program’s 20-year existence, Hill pointed to two critical points in the effort toward moving the program forward.

The first: a financial assessment of borrowers.

“We don’t yet have the magic solution for exactly how we think the borrower should be assessed for capability and willingness, but we think it’s critically important to work with you to figure out all the steps to that,” Galante said. HUD is entering into a rule-making process on the topic, which Galante said will take time, but is essential to move along as quickly as possible. She noted an October 5 letter she sent through a HECM Program Update, which stated lenders are not prohibited from doing a financial assessment.

“It is an important thing to be doing in this environment,” she said, “and I know you are thinking of ways to do this.”

The second crucial topic is that of housing counseling funding, which Galante noted was zeroed out in the budget for the coming year.

“Housing counseling agencies have been out there running on fumes and are desperate to have some counseling dollars restored,” she said. “I have been up to the Hill in conversations with congressmen on this topic more than anything else in the three months I have been in this post.”

The FHA is looking at the program to ensure it remains sustainable from a credit subsidy standpoint, Galante said, underlining that in order to continue, it must remain neutral.

“This program is very important to HUD,” she said. “We think it’s very important for seniors as a tool and we are trying to improve it, to make it the best it can be, and stabilize it so we can continue to offer this very vital product.”

Written by Elizabeth Ecker

“It creates a disadvantage, especially for brokers that are dealing with customers who come from websites or lead purchases, when those customers are shopping around heavily and/or possibly concerned about a broker’s legitimacy,” said Lance Jackson, of Castle Reverse Mortgage. Jackson says that there is little impact on his business, which is largely referral driven. But a concern arises when it comes to HECM counselors who are asked by borrowers for lender recommendations.

Counselors are instructed to point borrowers to the HUD Lender List if the borrower asks for a recommendation. While the vast majority of borrowers have already spoken with a lender once they come to the counseling session, still a fair percentage end up seeking guidance and going to the list for more information.

“If a borrower asks, ‘How do i find a lender?’ we do point them to that lender list,” says Christena Schafale, Director of Information Services for Resources for Seniors. Schafale estimates that while 90% of her clients have already made contact with a lender, still 20-30% will still ask for guidance in finding additional lenders to talk with. In that case, the Lender List is the only HUD-approved resource.

“HUD has told us that’s the only thing we can do,” she says.

For other counselors, while they may not point borrowers to the list directly, HUD is the sole resource for approved lenders.

“My biggest concern is the counseler issue,” says Beth Paterson, executive vice president of Reverse Mortgages SIDAC. “If they only recomemend the HUD list, they are leaving out brokers,” she says.

Paterson noticed the change in the national list after finding her company had been removed from a local resource listing reverse mortgage originators, due to the HUD update, which the Department says would be difficult to change.

“Our responsibility is to FHA Approved entities,” a HUD spokesman told RMD. “It would be very difficult for us to list ‘sponsored originators’ since those individuals are managed by and have a relationship with the FHA-approved lender, not with FHA.”

Not listing those sponsored originators is problematic from the viewpoint of those originators, who are just as qualified and approved as their lenders, but don’t make the cut when it comes to the list.

“It’s a disadvantage to us because we no longer have to go though the FHA approval, but we are lender-approved,” Paterson says. “My frustration is that it’s a disadvantage if counselors do reference the HUD list, or if a borrower is looking to verify that we are approved. Somehow, we as brokers need to be able to be identified as being legitimate.”

Establishing legitimacy is the biggest concern of brokers who spoke with RMD.

“One could conclude if you’re not on the list, then you’re suspect,” says George Downey, of Harbor Mortgage Solutions.

That could create problems from a competitive standpoint, brokers say.

“The problem with a list of HECM lenders from the HUD website is that it excludes all of the broker population that originate HECMs,” says Lynn Wertzler, president of Greenleaf Financial. “The implication is also that if a broker is not listed on the HUD website, then the broker is not a legitimate firm to do business with. To the extent the HUD list is referenced by people looking for a HECM lender, this will guarantee the business will go to the Full Eagle with the brokers having no chance to win the business.”

One potential solution, Paterson noted, could be distinguishing HECM originators through the National Mortgage Licensing System, which tracks all licensed brokers and lenders. Currently, the database does not identify which brokers originate HECMs.

“There may not be an overnight fix,” Paterson says, “but there has to be a solution.”

Written by Elizabeth Ecker

Right now, it’s anybody’s guess, but some are saying the failure of the Super Committee to meet its cuts may not be such a bad thing.

The Committee, a 12-member bi-partisan group including House representatives and Senators, must come up with a proposal of $1.5 trillion in cuts over 10 years that will help control the budget deficit. The proposal, due November 23, would then be voted yea or nay by Congress without the opportunity to amend, obstruct or filibuster. That decision would be due by December 23.

If the committee does not meet its goal, across-the-board cuts could be felt by all departments in government, including the Department of Housing and Urban Development. While cuts are not something the reverse mortgage industry is looking forward to facing, the uncertainty factor takes center stage.

“We are on such uncharted grounds for across-the-board cuts,” said Peter Bell, National Reverse Mortgage Lenders Association president and CEO. ”It throws the whole country into a crazy situation. HUD has all these programs it administers, then would have to go back and implement the cuts for all programs,” Bell said. “Play that our across the whole government… it’s uncharted grounds.”

A HUD spokesman declined to comment when asked how the cuts would impact the HECM program.

“Given the large areas of the budget that are protected, these cuts will be on the order of 15% from the domestic discretionary portion of the budget. This would include most of the housing programs,” said Dean Baker, co-director of the Center for Economic and Policy Research in Washington, D.C. “The good side is that relatively little of this hits in 2013. Most of the cuts are for later in the decade, but actually [run] much deeper. However, a lot will happen between now and then, so those cuts may never kick in.”

Additionally, the sensitive nature of housing could be a saving grace for FHA.

“For Republicans, it’s not in their interest to tank the housing markets either,” says David Min, associate director for financial markets policy for the Center for American Progress. “The political sense I get is nobody is trying to shut down FHA.”

Some believe that a flat cut would actually serve as the lesser of two evils when it comes to cuts.

“If they agree on a 2% cut across the board, that’s probably a good thing, versus the uncertainty associated with ‘We’re not going to do across the board cuts, we’re going to look program by program,’” says H. West Richards, executive director of the Coalition for Independent Seniors (CIS). “That makes all the various industries nervous.”

Even the defense industry is split on the issue, and defense stands to bear half of whatever across-the-board cuts are made, Richards says. Being able to implement a flat percentage cut could be simpler overall.

“It would be a nice, simple something that everyone could understand,” he says. “The alternative seems like a very complex endeavor.”

But a 2% cut doesn’t necessarily accomplish the desired end goal.

“Most sectors would do much better with a 2% cut, but that doesn’t get you $1.5 trillion in savings,” Baker says.

Whether the Super Committee will even come to agreement on the cuts to reach its $1.5 trillion goal is another issue.

“I think it is highly unlikely that they reach an agreement,” Baker says. “Most of the Republicans will not go along with any tax increases and are reluctant to support cuts to defense. There is no way that Democrats will support cuts to Medicare and Social Security without some real tax increases.”

Written by Elizabeth Ecker