Former FHA Commissioner: Washington Must Resolve Uncertainty Within HECM Program

Former FHA Commissioner Brian Montgomery’s support couldn’t have come at a more important time for the reverse mortgage industry.

In his latest opinion piece for Mortgage News Daily, he calls on representatives in Washington, DC, to look beyond the budgetary and actuarial concern of the $250 million subsidy request for FHA’s reverse mortgage program.  The “$250 million is a rounding error in a proposed 2011 federal budget of $3.8 trillion” he says.  “The reverse mortgage product has at its very core an essential social purpose.”

Montgomery believes that reverse mortgages help address the growing concern of how the growing senior population will be able to age in a comfortable and secure environment.

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He ends with the following:

My message is clear: OMB or the Congress needs to quickly, finally, and absolutely resolve the appropriation concern which has helped bring about too much uncertainty within the HECM program. That stalemate has been bad for hundreds of thousands of seniors who are struggling during these weak economic times and quite frankly have very few, if any, other options that offer the quality of life that the reverse mortgage does.

The House Committee on Appropriations has provided $150 million for the HECM program for FY 2011 but whether the Senate will provide any funds is still unknown.  Lets just hope Congress takes Montgomery’s advice and supports the program.

Definitely worth the read.

HECMs Stuck in Reverse. HUD Considers “Two Product” Solution

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  • Add to that “essential social purpose” an enduring socio-economic value that dwarfs the $250 million program support HUD has requested. Amen, Mr. Montgomery!

  • Hope Mr. Montgomery can lobby to FHA on behalf of seniors who live in a co-op who have been waiting for the HECM for 2 years now. HUD has failed to implement the MOrtgagee Letter to the lenders so that thousands of seniors can afford to stay in their homes. We need help and call to action NOW.

    • Akoolkat,

      Are you really sure former Commissioner Montgomery supports that position? Many in HUD do not believe HUD has any business insuring debt on personal property. While I do not know any Mortgage Loan Originators who do not want the business these properties will bring the industry, theoretically some of us question the potentially disproportionate losses these properties will bring into the HECM program.

      Watching the changes in values of condominiums versus co-ops within the same senior community has been an exercise in watching the differences in volatilities of different types of properties. Despite similarities in size, fees, condition of properties, and financial position of the HOAs, condos within this community have significantly higher values, see less volatility, and have wider appeal when it comes to sales.

      If co-ops have lower appreciation rates than condos within the same markets, some believe that they will bring a disproportionate share of losses into the HECM pool. While this may not be true in the upper end valued co-ops immediately surrounding Central Park, it seems to be a potential problem south and west of the Hudson.

      If anyone knows of studies on this subject disproving or confirming these very subjective conjectures, it would be helpful to have them cited.

      • I dont know what you are talking about. I live in Southern CA and we have 6,500 co-ops and 6,000 condos in this premier senior community. The HECM program is designed to help all seniors 62 of age and older to be able to access the equity in their units. Because the co-ops can not get a HECM while the condos can is discrimination and senior elder abuse. People in expensive homes do not need a reverse mortgage, it was designed to help lower to moderate income seniors to avail themselves of their hard earned money sitting in their homes. We are the ones who need the help, not the high income people. Co-ops do not bring down the market in any disproportinate share of losses. Give help to the seniors who need it, regardless of what type of housing they live in.

      • Akoolkat,rnrnYou’ve got to be kidding. You are responding to a reply that is over one month old.rnrnWhile you are passionate, you are not very logical. You call your community premiere which is exactly right. Yet you imply your homes are not expensive. Then you declare that you are not high income people. If you are not, most seniors do not understand how you afford your monthly homeowner association dues which generally run over $6,000 per year.rnrnIt is not that I do not believe in your cause; we would love to be able to place HECMs on coops particularly in your community. But accusing HUD of illegally discriminating or committing senior abuse is hardly a u201ckoolu201d act. Please point to the law you are basing your claims upon.rnrnWhile 6,500 coops is certainly a large group, it is hardly significant when looking at that population as a whole. As stated before, you need to work with those on the eastside of the Hudson, if you want a meaningful voice.rnrnI have not only placed reverse mortgages on coops but also the homes of u201crich people.u201d You need to ask the u201crich peopleu201d why they need a reverse mortgage. Not only did they need them, but they got them.rnrnFinally, with the same living space, same configuration, and similar maintenance conditions, I know of no condo which has a value lower than a coop in your community. Why do you think that is? Also the values of coops seem to drop more quickly in your community than condos even though the total percentages lost now seem to be about the same. Can you explain that phenomenon?rnrnRather than accusing HUD, I would strongly advise you to find out what their objections are and see if they can be addressed by your community. I really do not believe HUD is against those who own coops. I just believe they are having trouble trying to figure out how to apply what is essentially a real property insurance policy to personal property. With all of that u201ckoolnessu201d and brainpower in your community, it seems you could dream up a compromise that might work for all. rn

  • Someone previously asked why I mentioned the 2011 budget as part of the current $250 million HECM issue — an observation only recently brought to my attention. It was striclty for illustrative purposes to show that in the bigger picture of massive federal spending (irrespective of year), $250 million is a relatively small amount. In hindsight I should have used as a better comparison the cost of one C-17 cargo plane or the current value of the Colorado Avalanche (according to Forbes). Both are around $250 million. Thank you.

    • Mr. Montgomery,rnrnWhile Commissioner Stevens is a good substitute, we lost something when you left FHA. The same can be said about Meg Burns and her replacement.rnrnWe all wish you well in your new endeavors.

  • Someone previously asked why I mentioned the 2011 budget as part of the current $250 million HECM issue — an observation only recently brought to my attention. It was striclty for illustrative purposes to show that in the bigger picture of massive federal spending (irrespective of year), $250 million is a relatively small amount. In hindsight I should have used as a better comparison the cost of one C-17 cargo plane or the current value of the Colorado Avalanche (according to Forbes). Both are around $250 million. Thank you.

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