HUD Will Ask Congress to Raise Cap on Insurance Premiums for FHA Loans

The Wall Street Journal is reporting that the Federal Housing Administration plans to announce measures it is considering to protect its dwindling reserves.

According to the WSJ:

Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, plans to ask Congress on Wednesday to raise the cap on the annual insurance premium that the FHA can charge borrowers. In testimony before a congressional panel, he will also outline steps the agency is considering to set minimum credit scores, to require home buyers to put more money down, and to make lenders more accountable for loans that the agency insures.

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In an interview on Monday, the FHA’s commissioner David Stevens told the WSJ that “We have to replenish the reserves and we have to be prepared for a market outcome that may not be as favorable”.

Nothing in the article states that the agency plans on raising any premiums for FHA’s reverse mortgage product.

Update: HUD published the Testimony of Secretary Shaun Donovan Hearing before the House Committee on Financial Services

FHA Considers Ways to Boost Its Reserves

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  • If the annual rate is raised on the MIP charged on the outstanding balance for HECMs, then those whose cry is about using the HECM reserve to offset poor government forward loan decisions will be validated. Will HUD be forced to do this in order to save the forward loan programs? I hope not.

    While it is easy for the Administration to stomp on the HECM program, it seems difficult for them to face the financial realities of their current less than lenient forward loan policies. They should be taking the same home appreciation rates used in the HECM calculations and combining that with the ever growing job loss and loss in employment income projections to see if their forward loan policies make any sense. It seems in making home loan policy decisions this Administration and Congress are denying unemployment is above 10% and employment income is slipping and then are wondering why the FHA reserves are so depleted.

    This Administration has once again shown it is more willing to make policy decisions than come to gripes with fiscal responsibilities except where it comes to seniors. While the Clinton Administration was pragmatic, this Administration is policy driven in the same way the Carter Administration became. Now it is time to wonder (not if but) when we will once again return to 16% mortgage interest rates.

    Yes, the MIP needs to be raised on forward loans but this Administration and Congress must stop using FHA to try to bail out the home market. Their policies are getting homes off the market but at what price? Will we see a second wave of massive foreclosures? The way some in Congress are purposing reductions in mortgage lending standards you would think this is 2005 not 2009. It is no wonder that the current majority in the House is perceived as in danger of retaining that majority after the elections next year.

  • The Critic brings up some excellent points.

    I too am concerned that the HECM MIP was comingled with the general insurance fund and thus suffered losses mostly from the forward loans that shared that insurance fund.

    Can we expect to get a true and detailed accounting of HECM defaults and their charges against the MIP fund? If not, then it should be hands off when it comes to further penalizing seniors and retirees who want or need a reverse mortgage.

    It is a frustrating to feel that seniors have become the convenient and defenseless whipping post for the wrongs of the mortgage market. While this may not be entirely accurate the impression remains.

    Hopefully our industry is proactively voicing our opposition to further punishing seniors and future HECM borrower before it is too late.

  • When is enough ..enough?

    Talking about another haircut on top of the 10% already implemented, set asides for T&I, raising the MIP?

    What will be left? This will become a niche market for the high value home areas leaving many seniors high & dry and many dedicated loan officers out of work.

    I'm believe that FHA is focused only on the the big picture and that is the bottom line. I really believe our voices are fallinf on deaf ears. As the critic stated they see the next wave of foreclosures coming due to the low lending standards they are forced to accept.

  • Where is the highly vaunted Peter (…) (……)Bell and his NRMLA in all of these Washington D.C. doings? Also, AARP–maybe it would be a good thing if AARP endorsed a Lender, then AARP would have real dog in the fight
    and just might take a more positive stance in behalf of the FHA HECM.

    • jamesanelson,

      I really do not understand your jealously over Peter Bell. He is in a difficult position and does a very good job for the industry. Is your firm a NRMLA member? Yeah NRMLA could do more but they are a small organization with a relatively small budget.

      As to AARP, it is a collection of organizations. There have been times when one segment of AARP has gone one direction, another segment in the opposite direction, and the rest unmoved. One example is the recent Minnesota reverse mortgage legislation. You may be right about their endorsement but who really knows if that would have made a dime's worth of difference in the case of Minnesota legislation.

  • Believe me, Critic, it isn't jealousy: it's distain for him and all of his ilk. For this Country to return to its World prominance (instead of being the World's Greatest Debtor Nation), there should be Taxpayer Funded National Elections (and Campaigns obviously), Congressional Term Limits, and the banning of Paid Lobbists within five hundred miles of Washington, D.C. I've never met a Washington D.C. Lobbyist who didn't look down his nose at all those Yokels “out there” in the rest of the Country. I repeat has Mr. Peter (…) (……) Bell ever originated an FHA HECM himself? Please tell me the great reverse mortgage industry lobbyist has; After all he is the guy who is who is supposed to know more about them than anyone else, right?

    • James,

      You may never become close friends but it would be worth your time to meet Peter. I have heard Peter speak at Conventions and do not always agree with him; however, I know he works hard at representing us and does so well.

      While there are things I wish NRMLA was doing or doing differently, despite its limited staff and budget it does a great job. NRMLA does a lot more than lobbying activities. It works with HUD and other government entities, investigate poor marketing, monitors media reports on the industry, follows state and federal legislation, and much more. Even if there was no need for lobbying, there would still be the need for someone to do what Peter does.

      Until the situation in Washington is as you believe it should be, we need Peter to do what he is doing. We also need to support NRMLA even when we do not agree with everything it does or is not doing.

  • You, Critic, are a most erudite man (woman?) of letters; obviously a person possessing a well education mind. Mr. Peter (…) (……) Bell, or any of his cabal, are not high on my list of people to meet. I wish to spend the last of my days helping real Seniors get through life during their final challenging years with the help of an FHA HECM. By the way, It astonishes me that as talented, smart and knowleable as you are, you feel the need to hide your identity behind an alias . You are a very remarkable man (woman?) You should have been a lawyer (and may well be!) Remember that great Western love story: I believe it was Mr Newman (Butch Cassidy) who said “Who are those guys anyway?”)

  • You, Critic, are a most erudite man (woman?) of letters; obviously a person possessing a well education mind. Mr. Peter (…) (……) Bell, or any of his cabal, are not high on my list of people to meet. I wish to spend the last of my days helping real Seniors get through life during their final challenging years with the help of an FHA HECM. By the way, It astonishes me that as talented, smart and knowleable as you are, you feel the need to hide your identity behind an alias . You are a very remarkable man (woman?) You should have been a lawyer (and may well be!) Remember that great Western love story: I believe it was Mr Newman (Butch Cassidy) who said “Who are those guys anyway?”)

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