If Reverse Mortgage Industry Grows, Could Exceed Appropriation

Despite receiving $150 million from the House Appropriators Subcommittee for the HECM program, industry insiders stressed to RMD the appropriations process is a long way from over and there is still lots of work to be done.

There is no doubt that getting $150 million was a good step in the right direction according to Jeff Lewis, Chairman of Generation Mortgage and the leader behind the Coalition for Independent Seniors. “Getting zero would’ve been an extremely difficult situation,” he said in an interview with RMD earlier this week.

But without the full $250 million appropriation requested in the Obama Administration’s FY 2011 budget, the reverse mortgage industry could be limited in the amount of growth it can see and the number of seniors who have access to the program.


According to the Office of Management and Budget, the $250 million subsidy covers 130,000 units with a max claim of $30 billion during fiscal year 2011. However, House appropriators felt $150 million for the HECM program would be sufficient to cover the expected volume during the next fiscal year. Industry analysts estimate the $150 million would cover roughly 69,000 units, less than what is anticipated for FY 2010.

Data from the US Department of Housing and Urban Development shows 60,603 HECMs have been endorsed during fiscal year to date. Conservative estimates for the remaining three months put year end endorsements at just over 75,000 units and more than the House appropriation would cover.

“If the industry grows, we have a big problem with using up the appropriation,” said Lewis. By endorsing more units than appropriators estimates, HUD could be forced to shut the program down for the remainder of the fiscal year unless it receives additional help from Congress.

“We cannot exceed the appropriation,” said a spokesperson from HUD in an email to RMD. “We closely monitor the volume and if for some reason the $150 million appeared to be insufficient—we would notify Congress in advance and would likely get a supplemental to keep it open.”

Last week at it’s “road show” in Irvine, CA, Peter Bell, President of the National Reverse Mortgage Lenders Association stressed to attendees the organization is “trying to get as much as we can possibly get.”  He added, getting $250 million for the HECM program “is a pretty tall order in this tight fiscal environment.”

There is a chance the new HECM Saver program could offset the difference in the appropriation as well according to Bell.  However, it’s not something the industry is counting on and is the reason it continues to tell its story to politicians in Washington.

After spending last week in DC, Lewis said, “we’re building momentum, connecting with more senators and congressman and they’re becoming more enthusiastic about what we’re doing for seniors.” This connection isn’t something the industry had before and the fact that they’re realizing it is “very important to the industry,” he said.

The bill heads to the full House Appropriations committee on Tuesday and the Senate appropriations subcommittee is expected to introduce the bill soon.

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  • The fear of $150 million being too little is far too premature. Backing it up with spreading fear that the program could stop next year does not match the glowing report about the growing positive momentum in Congress for the program.

    With higher ongoing MIP and lower PL factors, 69,000 HECMs endorsed during the 2011 fiscal year may be overly optimistic. The old adage, “a bird in hand is better than two in the bush,” should be the order of the day.

    If the Senate gives us $250 million and the House only $150 million, without reconciliation the result could be as bad as no appropriation at all. Just look at what happened last year. The Senate gave us $288 million and the House nada but some led us to believe that the House would follow. Despite passed bills in both chambers, no reconciliation meant we got nothing, zero, nada, zilch. Let’s avoid greed in favor of $150 million.

    In 2007 many in our industry oversold the idea that proprietary products would grow so dramatically that they would be the principal industry product by now. Tendencies rarely change and we see that trait in some of the statements above. It was memorable watching the disbelief on the face of former Commissioner Brian Montgomery as these proprietary reverse mortgage prognostications were being presented at NRMLA in 2007. Guess whose opinion prevailed?

    Even if the level of current HECM products exceeds 69,000 what is the reasonable maximum? I doubt if it is even 100,000. So how much more appropriation do we really need? With possible offsetting profits from the introduction of HECM Lite sometime in the next 9 months, the possibility of returning to Congress to ask for a very small supplemental amount, further reductions to PL factors for a very short period of time, and little possibility of achieving anything close to 130,000 HECMs endorsed next fiscal year, why do we need much more than $150 million?

    This is not Las Vegas. Let’s not get too carried away about the prospects of the volume of the existing HECM products throughout fiscal 2011 to gamble away the current $150 million. I, for one, predict volume on existing HECM products will be less than 130,000; a real difficult and tough projection to make (LOL).

      • Admin,

        I certainly did not mean you were the source. There is that kind of talk going on in the industry and I felt to attack the statement not the one who wrote it. My apologies if it was taken that way.

      • 69,000 being overly optimistic? I'd bet that view is held by only 10% or so of market players. Problem is that it is a fair assessment.

  • 69,000 being overly optimistic? I’d bet that view is held by only 10% or so of market players. Problem is that it is a fair assessment.

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