FHA Chief: Reverse Mortgage Program Changes are Paying Off

The Federal Housing Administration today announced the results of its annual actuarial review of the Mutual Mortgage Insurance Fund, including the fund for the FHA’s Home Equity Conversion Mortgage program. The HECM program received a transfer of $535 million from the MMI capital reserve account in 2011 to meet shortfalls. However, the transfer is less than half of the $1.74 billion transferred last year, and FHA projects the HECM portion of the MMI fund to increase.

“Our projections indicate that, as of the end of FY 2011, the HECM portion of the MMI fund has sufficient capital resources to meet its future liabilities and hence will not require support from the overall fund,” the report states. “Expected improvements in house price growth rates and recent increases in mortgage insurance premiums contribute to a steadily increasing economic value of the MMI HECM portfolio from FY 2011 through FY 2018.”

The total economic value of the HECMs in the fund is projected to increase from $1.36 billion in FY 2011 to $10.03 billion in FY 2018.

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“The increase in premiums and the HECM Saver both positively impacted FHA’s finances,” said Carol Galante, acting FHA commissioner during a press call on Tuesday. “Also, given additional guidance to lenders on property insurance default we expect to have a positive impact on the fund.”

Galante also noted the pending financial assessment of borrowers that one lender began implementing this week and others are working to put into play.

“We are also looking at longer term guidance with the financial assessment of borrowers that will come into play down the road.”

For the overall MMI Fund, Galante said FHA is working off most of its losses, and that a recent Wall Street Journal article indicating FHA’s financial troubles “got it wrong.”

“The quality of FHA’s business continues to improve significantly,” she said.

Download the report at HUD.gov.

Written by Elizabeth Ecker

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  • Now we see once again that HUD is transferring funds out of a capital reserve fund which the HECM program has never contributed one dollar to.  The total transferred into the HECM now exceeds $2.3 billion with absolutely nothing going the opposite direction.
     
    RMD just came out with a special report by Elizabeth Ecker.  The thrust of that report was things are difficult in Washington.  Elizabeth quotes H. West Richards of the Coalition for Independent Seniors (“CIS”) as saying: “Once conservative members of Congress realize that HECM is a government backed ‘private enterprise’ solution for an increasingly important public policy challenge, our value proposition takes on a whole new meaning for them.”  West goes on to say  “Our main challenge moving forward is really one of education,  Members of Congress do not fully comprehend how and why the government must remain part of the reverse mortgage equation for it to function at its maximum potential.”
     
    Not long ago CIS members were stated to be roaming the halls of Congress distributing their message of a self-sustaining program while asking members of Congress to subsidize HECM counseling.  What an interesting message, “we are self-sustaining but please give us money for counseling.”  Perhaps I have not been sufficiently DCized but total transfers of over $2.3 billion in two fiscal years does not sound that much like either a “private enterprise” solution or a self-sustaining program.  If I were a conservative member of Congress I might also have a little problem with that message.
     
    As a conservative and a HECM originator I cannot make either case especially when arguing for counseling subsidies.  Are the arguments as transparent as they seem?  In May 2009 a prominent member of the CIS was vainly and openly arguing that there was no way the HECM program had incurred cash losses.  The problem was the discussion was about the budget not the cumulative cash profit of the HECM fund.  The leader did not seem to understand that there is a huge difference between an anticipated loss and an actual loss.  So perhaps Mr. Richards is right; the challenge for the CIS is education.
     
    It seems I am drinking the wrong brand of water or have not taken the right “pharmaceutical.”  Perhaps the familiar cliché of “a billion here, a billion there and pretty soon you’re talking about real money” is simply too old and outdated.  Somehow it seems I need the sort of education which eludes me.

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