HUD Lowers Principal Limit Factors for FHA Reverse Mortgage Program

image The U.S. Department of Housing and Urban Development posted Mortgagee Letter 09-43, which announced a new set of principal limit factors for the Federal Housing Administration (FHA) HECM program.  The changes will lower the principal limits for the HECM by 10%.   

According to the ML, the new principal limit factors must be used for all HECMs which the FHA case number is assigned on or after October 1, 2009.     

All loans for which the FHA case number has already been assigned as of September 30, 2009 may be processed as usual. The lender need not change any of the calculations of principal limit or re-disclose to borrowers any changes in the HECM proceeds that the borrower will receive.

Advertisement

The announcement comes after the National Reverse Mortgage Lenders Association worked directly alongside AARP and FHA about what the industry’s options were.  FHA felt that since the appropriations process is unlikely to provide credit subsidy, program changes are the only viable route for keeping the program operating past September 30, said a statement from NRMLA.

Since an appropriations bill hasn’t been passed yet, NRMLA told RMD that an interim measure known as a “continuing resolution” is being brought up in Congress.  This will continue the suspension of the authorization cap on the HECM program, allowing HUD to continue insuring HECMs, but provides no credit subsidy.  

Mortgagee Letter 09-43

Join the Conversation (102)

see all

This is a professional community. Please use discretion when posting a comment.

  • You are correct but it only amplifies the importance of Ginnie Mae as an alternative source. What is true for individual firms is a micro picture. On a macro level, things are much different.

  • lindenleernIf your facts are correct about the allocation of the MIP to cover forward mortgage losses, then previous administrations and regulators were remiss in protecting seniors. The current tone in government may not be anti-senior although it sure seems that way. My theory is that the amount of the subsidy and the concerns of seniors re: RMs and medicare are so small that they are hidden by the “big” subsidies/bailouts/reforms/union concerns, etc. It seems easier to overlook the “small” problems- when your heads (administration and congress) are high up in the sky, it is hard to see the worker ants below.

  • Cynic,rnrnYes GNMA is an option – but let’s be real about it. There are only a very few, select lenders in this industry that have the balance sheet capable of pulling off a GNMA. The additional risk, cost, and overall structure of a HMBS securitization do not create a viable option for most lenders in the business.

  • Maybe I misunderstand the way that FHA uses the premiums for reverse, but hasn’t it used those surpluses on the HECM side for years to offset losses on the forward side? So haven’t the seniors in reality been subsidizing the young people all this time? Don’t those surpluses that the HECM provided for years count for anything in this one year where a subsidy is needed? We can’t afford $700+ million when our crazy gov’t is going into debt this year for $1.5 TRILLION?!nnI could never understand why the claim history of the program wasn’t examined over the years to see if FHA could reduce the premiums to reflect the claim costs to the program, as FHA did for the forward side. Shouldn’t each side pay its own fair share? Shouldn’t the seniors get a break when the claims are small, and have their premiums reduced?nnI see in this just another way that the very government that says it cares about seniors actually discriminates against them, and sees them as just another revenue source that can be exploited in the good years, and cut off at the knees in the bad years. They should be ashamed of themselves. nnBut hey, The One is about the cut off their Medicare to the tune of $500B, so what a few more cuts to their HECM benefits, right? Those seniors are, after all, “useless eaters”. Disgusting.

  • Hey Matt,rnrnDon’t expect MIP to change. Right now that is a dream and even if it did it might not affect the current PLF adjustments.rnrnThe PLF reductions are not permanent. They could end within days from starting, IF Congress provides a subsidy (a Pollyanna type wish) or it could be lowered IF Congress provides a partial subsidy (Pollyanna’s more pessimistic sister’s). We’ll see.rnrnThis PLF adjustment will end on 9/30/2010 no matter what. However, if there is another loss projected for the following fiscal year (a real possibility), the PL factors could be adjusted again.rnrnIn the last sentence you are tying factual matters to projections. If the appropriations act is passed with no HECM subsidy, the only way the principal limit factors will return to what their levels were before 10/1/2009 is if Congress and the President amended the subsidy amount based on higher expected home appreciation rates– very highly unlikely or in Conference Committee next month a full or partial subsidy is provided. However, if there is no loss projected for the fiscal year ending 9/30/2011, the PLF levels applicable before 10/1/2009 should go back into full force on 10/1/2010.rnrn

  • If the lending limit returns to $417,000 on January 1, 2010 combined with this 10% reduction, a senior who just turned 63 with a home appraised between $635,000 and $640,000 on both September 30, 2009 and January 1, 2010, will only be eligible for 60% of the principal limit on January 1, 2010 that the senior could have received on September 30, 2009 if a FHA Case Number was in place on date. That is a 40% drop. What a drop in not much more than 3 months!!!

  • Mr. Torres,rnrnI thought one of the benefits of a HECM mini, light, or whatever was lower MIP. The MIP in case is not lower.rnrnAs your comment 6), it is worse. The cost per dollar of proceeds just went substantially up.

  • Mr. Bell,rnrnCould also please address with Mr. Stevens the question of seniors who need help in buying a home using a HECM — also receiving financial assistance such as a grant from a charity like a church, synagogue, mosque, etc.? Some religious groups have expressed interest in helping seniors in their congregations get into better living situations. Some of these seniors have good incomes but due to the needs of their families could never save up enough to put a down payment on a home. There are even some charities whose stated purpose is to provide financial support for seniors to get a home.rnrnThanks.rn

  • To The Cynic: Oh if it were only still the Party of Lincoln–A President who cared about the common man and preservation of the Union. The Democrats do indeed seem to be intent upon becoming the Party of the Political Eliternand the poor–as long as the poor vote to keep the Leaders in Office and keep their mouths shut (and die on the Battlefield so the Elite’s children do not). At my age reading the obituary pages is a daily occurence, if for no other reason than to see if my name is listed. It is amazing to me to read some of Life’s accomplishemts by deceased Citizens who served their Country during World War II, The Korean War (sorry, Police Action), and the Viet Nam Conflict (another euphemism for War). In the future this will not be the case: When parts of our society are protected against having to pay the ultimate sacrifice for the same Freedoms, our Country suffers. For some, loses are only tallied in dollar bills. The FHA HECM program is a blessing for most Seniors struggling to remain in their homes, It’s something our Government and our Leaders have got right. Perhaps instead of paid spokespeople (so called celebrities) to shill the program, the Industry needs real Senior homeowners to honestly and emphaticly describe how the reverse mortgage has been a Godsend to them. Maybe adjustments need to be made, but stopping Seniors from using the program is a geniune mistake.

  • Mr. Nelson,rnrnIt is not the party of Lincoln that controls the subsidies. It is the party of FDR (Social Security), LBJ (Medicare), and now BHO with the Congressional leadership of Speaker Pelosi and Senator Reid. In eight months, our President has championed many other causes including cash for clunkers but where are his voice, speeches, and political support for HECMs?rnrnIt was the HUD Administration of a conservative President, RWR (HECM), which created the HECM program. It is the OMB of a liberal President that started the current mess. Marty Bell decried the OMB calculation as a disputed amount in his excellent rebuke to the Consumer Reports article. Then there is a significant supporter of our President, a U.S. Senator (D-MO), who sees fraud and disaster in nearly every part and facet of the HECM program. rnrnIn early December last year, who would have u201cthunku201d this would be the position we find ourselves today? Back then I for one was lulled into believing that the HECM program was now in good hands. How badly mistakenu2026.rn

  • It sure would have been nice of HUD to drop this bomb on us in conjunction with an adjustment to the MIP collection. If they are going to drastically decrease the proceeds available, they need to drastically cut the 2% upfront in favor of a higher ongoing MIP rate.rnrnIs this a permanent change? Or is the window open for the factors to go back to where they are currently should we see appreciation in the housing market moving forward?

  • The logjam at the counseling agencies over the next few days is going to leave many would-be borrowers ‘out in the cold.’ I wonder if the cut-off will be the date of FHA case number application or issuance — if the latter, there will be another significant group of disappointed borrowers, and some of these will be wanting their $125 counseling fee back…

  • I always get criticized by many of you folks for talking politics; for some strange reason, many think they are just in the “mortgage” business.rnI still say if this great Country had to appropriate the money for nursing home care (and build the extra facilities needed) for all of the Seniors who will willingly remain in their own homes until death via the FHA HECM, it would cost a great deal more than whatever small amount of subsity is now being discussed. And remember Seniors VOTE in large numbers. And we not all suffer from demensia or Altheimers: Most have very have long memories. Above all, we remember those Polititians who live high off the taxpayer and spend trillians (I used to say Billions and thought that was bad) on unnecessary wars, supporting Presidents who have to get elected through fraud all the while neglecting our own CITIZENS. I would tell you young people that those Town Meetings filled with irate US Citizens and the Washington D.C. rally are not made up in large part of right wing Republican kooks. Many of those folks are like me: An Independent man who loves his Country, who served his Country in the US Military (and has a Son who is putting his life on the line in Iraq as I write), and who thinks his Country has been taken down the road of financial and moral disaster. We are a bankrupt Nation in more ways than one. We cannot continue to be the Policeman of the world; we cannot afford it. We have to stay home, put our own people back to work, close our Boaders to those who wish to kill us, and regain our Country’s focus on creating a better life for ALL Citizens, not just the top 5%. I voted for President Obama because he said he was going to change this Country’s direction. I hope he does. He will not be reelected if he fails to try. We didn’t get into this mess overnight and I’ll understand if He doesn’t solve all the problems immediately. It’s time Leaders start saying NO WE CAN’T AFFORD TO CONTINUE WASTING MONEY WE DON’T HAVE ON OTHERS; WE HAVE TO TAKE CARE OF OUR OWN.

  • The morons in Washington wonder why Seniors are wary of their proposed health care proposals. They will all pay for this come November 2010.rnrnWith property values doen dramatically, seniors needing money to stay in their homes will find it dramatically harder to get the Reverse Mortgage they need.rnrnWho is going to pay for the disaster coming for the FHA 97% LTV loans that are being done today. This is the new sub-prime disaster in the making.

  • As many have mentioned this is terrible timing…again without much time to prepare for change. Regardless of the weeks time frame we would have to get through counseling and have a FHA case # has to be assigned (which was mentioned sometimes is delayed and out of our hands). We are getting the short end of the stick…again. As Treverse says I am not getting out of the industry today or tomorrow. Although, everything is pointing to a bleak future to our industry. Yes, we have the baby boom!! But we have now very low rates and a 10% reduction. Has you all played with interest rates and see how they effect the funds available? ITS HUGE!! I guess we will all see how simply 5/8 of a percent effect it…remember this is less than 1 percent. How are the funds available going to look when rates go up 3% – 4% or higher especially against the costs…its not going to be worth it unless as all the reverse haters say…its a loan of last resort. Long term with interest rates going up this industry is in deep trouble unless we begin to get some good news on the product development front. Several of you others keep up the positive attitude…this is really a good thing????

  • FHA forward mortgages were pushed aside by subprime lenders because FHA was not serving the needs of borrowers. Subprimes, with a greedy appetite, got out of hand – as we have all witnessed. rnrnNow the reverse products, intended to provide peace of mind to people as they grew older, are being rendered ineffective due to the current economic conditions (low values, properties upside down in forward mortgages), principal limit reductions and potential reversion to old property value limits. We are seeing this lifeline to seniors lose its appeal. I am left feeling that when I throw out the lifesaver, it is only attached to a string. rnrnHas FHA not learned they need to make their products the “answer” to the needs of the current conditions before someone figures out how to make proprietary products appear as the new shining star to lure seniors into truly unadventagious products that, without strict guidance, could end up out of control?rnrnI can only thank Peter Bell and others who are able to commit increasingly more time to educating the people at HUD in an effort to make RMs the great product they were intended to be. Please keep up your efforts. The suggestions made so far are viable alternatives to keeping RMs available to those who need them most. And we all have our share of senior applicants who need a short pay from a lender who was most likely a part of the industry who is essentially at fault for providing the mortgage products that caused this current market situation. Keeping people in their homes whenever possible is THE key ingredient to turning this situation around. Having those lenders take a precarious second position rather than putting the homeowner out may not be as expensive to that lender, thus a better option. rnrnConcentration on making good, make sense loans rather than maximum profits should be encouraged industrywide, including forward mortgages, so we all can get back on solid ground.rnrnThanks again everyone for being diligent in your efforts. I honestly believe my future income rests in your hands as much as it does in my own. I can control my efforts. I trust in your efforts to assist in improving the industry so I have viable product to sell.

  • I don’t blame HUD or NRMLA for this – it the result of the size of our industry. rnSomeone just mentioned this to me and it hit home – this industry is incredibly fragile. We rely (for the most part) on one investor and one insurer. Any sort of hiccup with either and the house of cards falls down. Until we are able to expand our industry and diversify ourselves away from FNMA and FHA, we will continue to be held captive to the ways and whims of politicians.

  • Mr. Bell,rnrnThanks for mentioning the subordination issue. Please pursue that topic actively with Commissioner Stevens. Some of FHA’s restrictions appear unnecessarily prohibitive and FHA’s rationale for establishing them escapes me. This is particularly so regarding the ban on subordinating new or concurrent liens.rnrnThe best example of the potential mismatch between the primary aims of the HECM program and this particular FHA rule would be the borrower wanting a traditional HECM loan, but who faces a shortfall in paying off their existing mortgage balance with a lender that will not accept the subordination trade-off – a majority payoff now in exchange for a greater risk and smaller re-cast payments on the smaller remaining balance. rnrnThere are some lenders, usually credit unions, who are (or at least were) willing to provide new 3rd position loans for minor shortages in the payoff, and for which the borrowers could make the payments. If we could use these loans in a simultaneous closing with the HECM loan, we could significantly reduce the borrowers’ monthly debt payments from their present obligations. As it is now, we cannot always get these loans in place before we apply for the HECM, and the HECM lenders are understandably nervous about their ability to get the HECM loan insured.rnrnAnother use would be in purchases where the seller is willing to carry a note for the balance of the sales price. rnrnIn both cases, we could easily document whether the subordinated lien improved the borrowers financial circumstances or not. Some thoughful modifications could help FHA out-source some of the default risk, offset some of the negative consequences of this principal limit reduction for borrowers, and change a specialized tactic into a useful tool for more originators and lenders.rnrnrn

  • Peter Bell’s comments about interest rates were fine for the short term but do not offer any comfort for the future. What happens when the rates do go up? Also as far as I know the 625K limit is only temporary.rnrnLet’s look in the crystal ball. The limit goes back to 417K, Interst rates go up and a 10% reduction in principal limit? There’s not much left.rnrnRobert 2 may have the right idea. I’m not going anywhere soon but I would be crazy not to start thinking about an exit strategy.rnrn

  • Don’t you think our time would be better served by preparing to notify every potential lead you have of this change so they can get in before the change. By the way, if you feel overburdened, please send your excess leads to me.rnrn

  • It was clear to me, after a conversation with FHA Commissioner David Stevens earlier this afternoon, that the commissioner did not take this decision lightly. The Department found itself “between a rock and a hard place” on this matter.

    With the outcome of the HUD appropriations bill up in the air, the strong possibility of no credit subsidy being provided by Congressional appropriators, and the start of the new fiscal year just around the corner, HUD needed to act right away. The options available, essentially, were to 1.) reduce the principal limit factors to eliminate risk so the program could continue to operate without credit subsidy; or 2.) shut down the program on October 1 until an appropriation bill is completed. (For the past year, there has been no appropriation bill. HUD has been operating under a series of continuing resolutions.) I think all would agree that Commissioner Stevens chose the most preferable option.

    In our conversation, Commissioner Stevens indicated a strong willingness to work with us to address any segment of the population we work with who might be underserved by the program. One such area I hope to broach with him in the immediate future is the ability to utilize subordinate liens for homeowners who come up “too short to close” as a result of the principal limit reductions.

    The Commissioner and I also discussed convening some meetings to discuss future “fine-tuning” of the HECM program, including re-engineering the MIP to reduce upfront costs, getting the new “mini-HECM” product developed and launched, and other program enhancements.

    To those who are trying to quantify the impact of this principal limit “haircut,” when the possibility of a 10% reduction first surfaced several months back, one insightful observer told us that the impact would be roughly equivalent to a 5/8% increase in interest rates. Those who have been involved in the business for several years probably remember that interest rates were that much higher not too long ago and we were still able to do business then. Furthermore, back when interest rates were that much higher, we had considerably lower loan limits than today.

    We recognize that this is bitter medicine to swallow, but the bottom line is tha this puts the program back to operating on a fiscally responsible basis and helps protects it from further challenges by its critics.

    • Mr. Bell,

      Could also please address with Mr. Stevens the question of seniors who need help in buying a home using a HECM — also receiving financial assistance such as a grant from a charity like a church, synagogue, mosque, etc.? Some religious groups have expressed interest in helping seniors in their congregations get into better living situations. Some of these seniors have good incomes but due to the needs of their families could never save up enough to put a down payment on a home. There are even some charities whose stated purpose is to provide financial support for seniors to get a home.

      Thanks.

  • Anyone else see the irony in reducing the LTVs on HECMs by 10% across the board while FHA's forward market share grows from 3% to 25% doing 97% LTVs for borrowers with low 600 scores?

    Which program did they say needs the subsidy?

  • Just a few observations:

    1) It is probably better that HUD made a programatic change to the HECM program rather than allowing a statutory change which will be much harder to reverse in the future. However, here is a question for Mr. Bell: Did the commissioner made any references to perhaps having all the PL reduction language drop from the current bills in congress?? If legislators are going to keep pushing for the PL reduction written into law then we still might have a problem.

    2) The timing of the anouncement is certainly a little late. Giving the industry only week to make the changes seems a little too short. I know the fiscal year ends Sept 30th but they could have made the announcement a little sooner to help the industry prepare for the change. The cutt off date is based on the FHA case number assigment date and in some cases, especially in HECM refis, there could be delays in the assigment of a new case number.

    3) Apparently the only new thing up in the HECM HUD website is the new software. There is a link for the new PL factor table but it is not working as of 8:13 EDT pm on 9/23/09. I still would like to see how they are implementing the 10% “haircut”, especially how it eliminates the subsidy and how the algorithm was modified.

    4) I am not so sure that a new continuing resolution could not have pass to keep the HECM program running. My previous experience as a civil servant, always meant that when a program was deem critical, it would keep the funding in place thru a CR.

    5) A HECM mini??? Isnt the implementation of the new haircut means that the HECM mini is here???

    6) From a high cost loan perpective, the “haircutted” HECM looks even worst than the old standard hecm when you divide the closing cost by the loan amount.

    One thing to keep in mind is that if for some reason the secondary market allows for the expected rate (either fix or adjustable) to go down to or below the floor of 5.50% then it would probably help to soften the blow.

    • Mr. Torres,

      I thought one of the benefits of a HECM mini, light, or whatever was lower MIP. The MIP in case is not lower.

      As your comment 6), it is worse. The cost per dollar of proceeds just went substantially up.

  • Peter Bell's comments about interest rates were fine for the short term but do not offer any comfort for the future. What happens when the rates do go up? Also as far as I know the 625K limit is only temporary.

    Let's look in the crystal ball. The limit goes back to 417K, Interst rates go up and a 10% reduction in principal limit? There's not much left.

    Robert 2 may have the right idea. I'm not going anywhere soon but I would be crazy not to start thinking about an exit strategy.

    • If the lending limit returns to $417,000 on January 1, 2010 combined with this 10% reduction, a senior who just turned 63 with a home appraised between $635,000 and $640,000 on both September 30, 2009 and January 1, 2010, will only be eligible for 60% of the principal limit on January 1, 2010 that the senior could have received on September 30, 2009 if a FHA Case Number was in place on date. That is a 40% drop. What a drop in not much more than 3 months!!!

  • Mr. Bell,

    Thanks for mentioning the subordination issue. Please pursue that topic actively with Commissioner Stevens. Some of FHA's restrictions, particularly the prohibition of subordinating a new or concurrent lien appear unnecessarily prohibitive, and for which FHA's rationale escapes me.

    The best example would be the borrower interested in a traditional HECM loan, but who faces a shortfall in paying off their existing mortgage balance with a lender that will not accept the subordination trade-off – a majority payoff now in exchange for a greater risk and smaller re-cast payments on the smaller remaining balance.

    There are some lenders, usually credit unions, who are (or at least were) willing to provide new HELOCS and/or 3rd position loans for minor shortages in the payoff. If we could use these loans in a simultaneous closing with the HECM loan, we could significantly reduce the borrowers' monthly debt payments. As it is now, we don't always have time to get these loans in place before we apply for the HECM.

    Another use would be in purchases where the seller is willing to carry a note for the balance of the sales price.

    In both cases, we could easily document whether the subordinated lien improved the borrowers financial circumstances or not. Some thoughful modifications could help FHA out-source some of the default risk and also offset some of the negative consequences of this principal limit reduction for borrowers.

  • I don't blame HUD or NRMLA for this – it the result of the size of our industry.
    Someone just mentioned this to me and it hit home – this industry is incredibly fragile. We rely (for the most part) on one investor and one insurer. Any sort of hiccup with either and the house of cards falls down. Until we are able to expand our industry and diversify ourselves away from FNMA and FHA, we will continue to be held captive to the ways and whims of politicians.

      • Cynic,

        Yes GNMA is an option – but let's be real about it. There are only a very few, select lenders in this industry that have the balance sheet capable of pulling off a GNMA. The additional risk, cost, and overall structure of a HMBS securitization do not create a viable option for most lenders in the business.

      • You are correct but it only amplifies the importance of Ginnie Mae as an alternative source. What is true for individual firms is a micro picture. On a macro level, things are much different.

  • FHA forward mortgages were pushed aside by subprime lenders because FHA was not serving the needs of borrowers. Subprimes, with a greedy appetite, got out of hand – as we have all witnessed.

    Now the reverse products, intended to provide peace of mind to people as they grew older, are being rendered ineffective due to the current economic conditions (low values, properties upside down in forward mortgages), principal limit reductions and potential reversion to old property value limits. We are seeing this lifeline to seniors lose its appeal. I am left feeling that when I throw out the lifesaver, it is only attached to a string.

    Has FHA not learned they need to make their products the “answer” to the needs of the current conditions before someone figures out how to make proprietary products appear as the new shining star to lure seniors into truly unadventagious products that, without strict guidance, could end up out of control?

    I can only thank Peter Bell and others who are able to commit increasingly more time to educating the people at HUD in an effort to make RMs the great product they were intended to be. Please keep up your efforts. The suggestions made so far are viable alternatives to keeping RMs available to those who need them most. And we all have our share of senior applicants who need a short pay from a lender who was most likely a part of the industry who is essentially at fault for providing the mortgage products that caused this current market situation. Keeping people in their homes whenever possible is THE key ingredient to turning this situation around. Having those lenders take a precarious second position rather than putting the homeowner out may not be as expensive to that lender, thus a better option.

    Concentration on making good, make sense loans rather than maximum profits should be encouraged industrywide, including forward mortgages, so we all can get back on solid ground.

    Thanks again everyone for being diligent in your efforts. I honestly believe my future income rests in your hands as much as it does in my own. I can control my efforts. I trust in your efforts to assist in improving the industry so I have viable product to sell.

  • The morons in Washington wonder why Seniors are wary of their proposed health care proposals. They will all pay for this come November 2010.

    With property values doen dramatically, seniors needing money to stay in their homes will find it dramatically harder to get the Reverse Mortgage they need.

    Who is going to pay for the disaster coming for the FHA 97% LTV loans that are being done today. This is the new sub-prime disaster in the making.

  • I always get criticized by many of you folks for talking politics; for some strange reason, many think they are just in the “mortgage” business.
    I still say if this great Country had to appropriate the money for nursing home care (and build the extra facilities needed) for all of the Seniors who will willingly remain in their own homes until death via the FHA HECM, it would cost a great deal more than whatever small amount of subsity is now being discussed. And remember Seniors VOTE in large numbers. And we not all suffer from demensia or Altheimers: Most have very have long memories. Above all, we remember those Polititians who live high off the taxpayer and spend trillians (I used to say Billions and thought that was bad) on unnecessary wars, supporting Presidents who have to get elected through fraud all the while neglecting our own CITIZENS. I would tell you young people that those Town Meetings filled with irate US Citizens and the Washington D.C. rally are not made up in large part of right wing Republican kooks. Many of those folks are like me: An Independent man who loves his Country, who served his Country in the US Military (and has a Son who is putting his life on the line in Iraq as I write), and who thinks his Country has been taken down the road of financial and moral disaster. We are a bankrupt Nation in more ways than one. We cannot continue to be the Policeman of the world; we cannot afford it. We have to stay home, put our own people back to work, close our Boaders to those who wish to kill us, and regain our Country's focus on creating a better life for ALL Citizens, not just the top 5%. I voted for President Obama because he said he was going to change this Country's direction. I hope he does. He will not be reelected if he fails to try. We didn't get into this mess overnight and I'll understand if He doesn't solve all the problems immediately. It's time Leaders start saying NO WE CAN'T AFFORD TO CONTINUE WASTING MONEY WE DON'T HAVE ON OTHERS; WE HAVE TO TAKE CARE OF OUR OWN.

    • Mr. Nelson,

      It is not the party of Lincoln that controls the subsidies. It is the party of FDR (Social Security), LBJ (Medicare), and now BHO with the Congressional leadership of Speaker Pelosi and Senator Reid. In eight months, our President has championed many other causes including cash for clunkers but where are his voice, speeches, and political support for HECMs?

      It was the HUD Administration of a conservative President, RWR (HECM), which created the HECM program. It is the OMB of a liberal President that started the current mess. Marty Bell decried the OMB calculation as a disputed amount in his excellent rebuke to the Consumer Reports article. Then there is a significant supporter of our President, a U.S. Senator (D-MO), who sees fraud and disaster in the nearly every part and facet of the HECM program.

      In early December last year, who would have “thunk” this would be the position we find ourselves today? Back then I for one was lulled into believing that the HECM program was now in good hands. How badly mistaken….

  • The logjam at the counseling agencies over the next few days is going to leave many would-be borrowers 'out in the cold.' I wonder if the cut-off will be the date of FHA case number application or issuance — if the latter, there will be another significant group of disappointed borrowers, and some of these will be wanting their $125 counseling fee back…

  • It sure would have been nice of HUD to drop this bomb on us in conjunction with an adjustment to the MIP collection. If they are going to drastically decrease the proceeds available, they need to drastically cut the 2% upfront in favor of a higher ongoing MIP rate.

    Is this a permanent change? Or is the window open for the factors to go back to where they are currently should we see appreciation in the housing market moving forward?

    • Hey Matt,

      Don't expect MIP to change. Right now that is a dream and even if it did it might not affect the current PLF adjustments.

      The PLF reductions are not permanent. They could end within days from starting, IF Congress provides a subsidy (a Pollyanna type wish) or it could be lowered IF Congress provides a partial subsidy (Pollyanna's more pessimistic sister's). We'll see.

      This PLF adjustment will end on 9/30/2010 no matter what. However, if there is another loss projected for the following fiscal year (a real possibility), the PL factors could be adjusted again.

      In the last sentence you are tying factual matters to projections. If the appropriations act is passed with no HECM subsidy, the only way the principal limit factors will return to what their levels were before 10/1/2009 is if Congress and the President amended the subsidy amount based on higher expected home appreciation rates– very highly unlikely or in Conference Committee next month a full or partial subsidy is provided. However, if there is no loss projected for the fiscal year ending 9/30/2011, the PLF levels applicable before 10/1/2009 should go back into full force on 10/1/2010.

  • To The Cynic: Oh if it were only still the Party of Lincoln–A President who cared about the common man and preservation of the Union. The Democrats do indeed seem to be intent upon becoming the Party of the Political Elite
    and the poor–as long as the poor vote to keep the Leaders in Office and keep their mouths shut (and die on the Battlefield so the Elite's children do not). At my age reading the obituary pages is a daily occurence, if for no other reason than to see if my name is listed. It is amazing to me to read some of Life's accomplishemts by deceased Citizens who served their Country during World War II, The Korean War (sorry, Police Action), and the Viet Nam Conflict (another euphemism for War). In the future this will not be the case: When parts of our society are protected against having to pay the ultimate sacrifice for the same Freedoms, our Country suffers. For some, loses are only tallied in dollar bills. The FHA HECM program is a blessing for most Seniors struggling to remain in their homes, It's something our Government and our Leaders have got right. Perhaps instead of paid spokespeople (so called celebrities) to shill the program, the Industry needs real Senior homeowners to honestly and emphaticly describe how the reverse mortgage has been a Godsend to them. Maybe adjustments need to be made, but stopping Seniors from using the program is a geniune mistake.

  • Maybe I misunderstand the way that FHA uses the premiums for reverse, but hasn't it used those surpluses on the HECM side for years to offset losses on the forward side? So haven't the seniors in reality been subsidizing the young people all this time? Don't those surpluses that the HECM provided for years count for anything in this one year where a subsidy is needed? We can't afford $700+ million when our crazy gov't is going into debt this year for $1.5 TRILLION?!

    I could never understand why the claim history of the program wasn't examined over the years to see if FHA could reduce the premiums to reflect the claim costs to the program, as FHA did for the forward side. Shouldn't each side pay its own fair share? Shouldn't the seniors get a break when the claims are small, and have their premiums reduced?

    I see in this just another way that the very government that says it cares about seniors actually discriminates against them, and sees them as just another revenue source that can be exploited in the good years, and cut off at the knees in the bad years. They should be ashamed of themselves.

    But hey, The One is about the cut off their Medicare to the tune of $500B, so what a few more cuts to their HECM benefits, right. Those seniors are, after all, “useless eaters”. Disgusting.

  • lindenlee
    If your facts are correct about the allocation of the MIP to cover forward mortgage losses, then previous administrations and regulators were remiss in protecting seniors. The current tone in government may not be anti-senior although it sure seems that way. My theory is that the amount of the subsidy and the concerns of seniors re: RMs and medicare are so small that they are hidden by the “big” subsidies/bailouts/reforms/union concerns, etc. It seems easier to overlook the “small” problems- when your heads (administration and congress) are high up in the sky, it is hard to see the worker ants below.

  • You are correct but it only amplifies the importance of Ginnie Mae as an alternative source. What is true for individual firms is a micro picture. On a macro level, things are much different.

string(112) "https://reversemortgagedaily.com/2009/09/23/hud-lowers-principal-limit-factors-for-fha-reverse-mortgage-program/"

Share your opinion