Appropriation for reverse mortgage program unlikely says HUD official

A request for $250 million to support the Home Equity Conversion Mortgage (HECM) program will not likely be approved for the federal government’s fiscal 2011 budget, according to Vicki Bott, HUD’s deputy assistant secretary for single family housing.

“We don’t expect an appropriation to happen,” Bott told RMD in a recent, wide-ranging interview, timed to the departure of long-time HUD figure, Meg Burns, who has left her position as director, FHA Office of Single Family Program Development, after 19 years, to join the Federal Housing Finance Agency.

As she headed out the door, Burns said the HECM program is “in a difficult place right now,” a view shared by Bott. “Meg is right,” she said, noting that the reverse mortgage program “was designed to be self-sustaining without additional congressional appropriations,” and that is proving untenable.

Advertisement

Without the aforementioned appropriation, Bott said the federal agency will have to look at ways to make HECM a self-sustaining program, at the same time exploring ways to solve some longstanding problems such as tax-and-insurance defaults and seniors’ financial qualification for reverse mortgages.

On T&I, “I think there’s a balance [needed] to give seniors enough time to figure out how to pay or sell the property and find alternative living arrangements,” said Bott, adding that “hopefully within 30 days we can talk more specifically” about the government’s intent. “Some finite amount of time will be set [after which] someone has to take the financial risk.”

On financial assessments, Bott said HUD is “looking at rules changes that would require a review of seniors’ financial capacity before they can be put into a reverse mortgage “where they might not have the financial capability for it.” Details of proposed changes will be made public in the Federal Register, in “not too long a time,” she said, adding that “right now, we don’t necessarily counsel [seniors] on the financial payment piece, so maybe a different level of counseling is needed.”

Written by Neil Morse

Join the Conversation (16)

see all

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

  • While there might be dwindling enthusiasm for finding the funding for the HECM credit subsidy among some at HUD, this report is entirely inconsistent with the public statements made by both HUD Secretary Shaun Donovan and FHA Commissioner David Stevens in testimony before Congressional appropriators as recently as last week. I find it somewhat puzzling that Deputy Assistant Secretary Bott would make a statement like this which contradicts the very public statements of her superiors in an interview with Neil Morse for RMD.

    In our numerous meetings on Capitol Hill in recent weeks, with both Members of Congress and key appropriations staffers, we have seen that there is bi-partisan support for keeping the HECM program intact. Getting the appropriation is still a challenge in this difficult budget environment, but there is considerable cognizance of the importance of not cutting the program's benefit to seniors much deeper than has already been done.

    NRMLA is actively working on this, but needs the help of industry participants. You are needed to sit down with your Congressional representatives to explain why the appropriation request by the White House needs to be fulfilled. Members of Congress will be home soon for the Memorial Day recess, so now is the time to make appointments to see them then. Alternatively, you can join us for the NRMLA Policy Conference in DC on June 7-9, get up to speed on all the issues and meet with your Representative and Senators' offices then.

    Don't just sit back and expect someone else to take care of it. Get involved and help win on this issue.

    • Mr. Bell,

      Unfortunately your comment was not posted before I submitted mine.

      It is good to read that the atmosphere in Congress is somewhat receptive to obtaining the indicated subsidy. I hope RMD readers will heed your words and find the time to actively seek out their Representatives and Senators both during the Memorial Day recess and the NRMLA Policy Conference to discuss how critical this program is to the seniors we serve. My wife and I will be attempting to meet with our usual two Representatives and, hopefully, two others we have informal connections with.

      It sounds like NRMLA has yet another great speaker lineup for the Policy Conference. Those who did not attend last year missed many interesting insights into our industry and the regulatory atmosphere NRMLA deals with. The reception was a great time to speak to several influential government officials and industry leaders. For several it was the first time they had met with their Congressman or staff to discuss the HECM program.

  • Massive bailouts for the “too big to fails” and no modest subsidy for a program that is most likely cash-positive?

    Seniors. Read this and remember where you fit in the politician's priorities?

    Very sad if true. Is the fat lady clearing her throat?

  • It might be time to get the sensationalistic media on our side with headlines like “Obama Administration Looking To Eliminate Reverse Mortgage Program”. How else do we get the prospective customers beating down the doors of our politicians? What will be the expected annual HECM volume after the next cut, 20K at best? Who will survive in this industry doing 1/4 of the business that they do now?

    Thinking about other ideas, can there be an amendment to a current bill that will place the HECM program back in the previous insurance fund? The individual with the OMB that has complete control over our industry right now via projected appreciation rates needs to be exposed. October 1st sure is looming large right now. I pray that an MI company out there will take a hard look at moving in to fill the gaping hole left by HUD's ridiculous reduction.

  • While many may wax eloquently about the needs of seniors and a few on the unassailability and inviolability of the mathematical and financial modeling underpinning principal limit calculations, it is none of these issues that need addressing. There is just two.

    The first is, should the self-sustaining test be based on a projection of the expected but discounted net losses (or net profits) arising from 1) annual cohorts of endorsed HECMs or 2) as it was designed, all HECMs expected to be endorsed over the life of the program? Second is the home appreciation rate(s) used in that projection.

    The reclassification of the program from the General Insurance fund category to the Mutual Mortgage Insurance fund category as required by HERA is a colossal disaster. Looking at annual cohorts of endorsed HECMs and trying to reasonably project their impact on the need for an annual HECM credit subsidy means huge fluctuations in how the program must be adjusted annually just to be self-sustaining.

    Because of the HERA change, we must aggressively pursue the criteria upon which the home appreciation rates used in the HECM budget process were selected. While fundamentally disagreeing with the Congressional mandate to determine an updated home appreciation rate for each budget, the OMB method makes the Congressional method seem not only rational but absolutely reasonable. The OMB method is not only irrational and unreasonable but it is also dangerous. The OMB practice was first established last year and is openly discussed in the July 2009 GAO Report on HUD.

    A simple fix is to prospectively return the HECM program back to the General Insurance fund category and codify the home appreciation rate selection methodology previously established by Congress. With the Dodd bill still pending, now is the time to add this fix as an amendment to that bill.

  • NRMLA has failed our industry. They must be held accountable for this failure and it's time for a major change at management there.

    • It's easy to point the finger, but the reality is that everyone in our industry needs to become more involved in developing relationships in DC.

      We all need to take responsibility and do our part. Have you called your local congressman to explain why it's such an important program?

      I have and I'm learning it's a lot of work, not a quick and easy fix. We all need to do a better job.

      • I'm not just pointing fingers. It's not an easy fix now that it's so far down the road, and that's exactly why NRMLA has failed us. Their main role is to represent the industry in Washington. These issues are critical to the survival of the industry, and NRMLA has not handled them well.

  • HUD, FHA, CONGRESS, GOVERNMENT officials all talk about the need for $250,000,000 and how the HECM program losses so much money. So far, I havn't seen any accountability for the monies they received, their expenses, the losses on defaulted loans and THE FULL FINANCIAL PICTURE OF THE PROGRAM.

    • DON,

      Which government officials or Congressmen specifically are talking about historical HECM losses? The situation is far worse. Their talk is based on low ball PROJECTED home appreciation rates that may or may not be reasonably accurate. Worse they talk as if the results are historically correct!!! However, the “results” are nothing more than projections.

  • Don't get your hopes up. $250 million isn't a lot of money compared to the rest of the Federal budget, but what other program's funding should be cut or whose taxes could be raised to pay for it?

    Everyone wants the government to fund programs that benefit them, but they don't want to pay taxes to support others' programs.

    • HECM_Vet,

      Unless you are convinced that 1) the OMB numbers are right, 2) somehow FHA has no control over its accounting system, or 3) FHA is deviously accounting for the HECM program, you are attempting to divide our industry and defeat an attempt by our leaders to get Congress to approve a simple $250 million bookkeeping entry.

      I do not have the patience or expertise to defend FHA on accounting matters. I have far too much respect for the staff at HUD to believe FHA has any significant fundamental problems in accounting for the HECM program. Unlike Fannie Mae or Freddie Mac, there is little, if any, incentive to do such a thing. I do not believe you are promoting that position, although you can quickly convince me otherwise.

      What you are promoting is that the OMB projected budget numbers for the fiscal year ending 9/30/2011 are right. If you are not, then why make this fiscally conservative argument? I consider myself a fiscal conservative but believe as a practical, prudent, and politically expedient matter, we need to support the subsidy. The $250 million will not be used, unless after all of the horrendous changes that the provision is proposing to HECM MIP and PLFs, there will be net losses of more than $250 million starting 5, 7, 10 years down the road that need to be covered.

      You claim to be a vet in this industry so, therefore, you leave me no other conclusion than you fully support the OMB projection and home appreciation rates. The question I have is why?

      If somehow you got carried away with your conservatism, you owe the industry an apology. Yes, I do not believe there is much of a chance to get the subsidy but why shouldn’t we at least try by putting our best efforts forward. I hold out absolutely no hope of convincing OMB that they are wrong and must change their numbers before the HUD appropriations bill is voted on. Supporting the subsidy seems to be the only way to keep the program with about the same PLFs during the next fiscal year.

      I look forward to your reply.

      • Since you solicit a reply, I'm doing so. My comments weren't on the merits of the proposed HECM subsidy; rather they were on the likelihood of our success in obtaining it, which I don't judge to be that good at the moment.

        As to whether I am a veteran, the answer is yes — on both counts. (I did serve in the military, and I have 32 years of mortgage experience, including 20 years since I originated my first HECM.)

        Finally, I'm too busy originating loans and running my business to be a full-time commentator on this message board.

      • HECM_Vet,

        First things, first. Thank you for your service to our country. Now on to business.

        Here is the first statement I found inconsistent with your reply: “…but what other program's funding should be cut or whose taxes could be raised to pay for it?” With an Administration and Congress which have only paid lip service to a balanced budget, this statement makes little sense if you believe there is no substance to the requested subsidy.

        Then you added: “Everyone wants the government to fund programs that benefit them, but they don't want to pay taxes to support others’ programs.” Again I do not understand how this statement is consistent with your reply.

        I’m sure you believe your statements are consistent with little likelihood for the need of the requested subsidy. I just don’t see how.

        Finally, if you really do not believe the subsidy has any merit, why make disparaging remarks about the likelihood of passage. In this situation, our leaders need our wholehearted support not our snide comments.

        Nice of you to imply that I am a full time commentator.

  • Since you solicit a reply, I’m doing so. My comments weren’t on the merits of the proposed HECM subsidy; rather they were on the likelihood of our success in obtaining it, which I don’t judge to be that good at the moment. nnAs to whether I am a veteran, the answer is yes — on both counts. (I did serve in the military, and I have 32 years of mortgage experience, including 20 years since I originated my first HECM.)nnFinally, I’m too busy originating loans and running my business to be a full-time commentator on this message board.

  • HECM_Vet,rnrnFirst things, first. Thank you for your service to our country. Now on to business. rnrnHere is the first statement I found inconsistent with your reply: u201c…but what other program’s funding should be cut or whose taxes could be raised to pay for it?u201d With an Administration and Congress which have only paid lip service to a balanced budget, this statement makes little sense if you believe there is no substance to the requested subsidy.rnrnThen you added: u201cEveryone wants the government to fund programs that benefit them, but they don’t want to pay taxes to support othersu2019 programs.u201d Again I do not understand how this statement is consistent with your reply.rnrnIu2019m sure you believe your statements are consistent with little likelihood for the need of the requested subsidy. I just donu2019t see how.rnrnFinally, if you really do not believe the subsidy has any merit, why make disparaging remarks about the likelihood of passage. In this situation, our leaders need our wholehearted support not our snide comments.rnrnNice of you to imply that I am a full time commentator. rn

string(114) "https://reversemortgagedaily.com/2010/05/18/appropriation-for-reverse-mortgage-program-unlikely-says-hud-official/"

Share your opinion