Volume of Reverse Mortgages Falls, Health of FHA Program Improves

Reverse mortgage volume might be falling, but the long term health of the Federal Housing Administration’s program is improving according to a new report.

During the Q3 of fiscal year 2012, the number of FHA-insured reverse mortgages fell by 5%, with 14,204 units being endorsed. Despite fewer loans, the current years book of business is expected to perform the best since the housing downturn in 2007.

During fiscal year 2011, the HECM program’s subsidy rate hovered just below 0% for the entire year, meaning it was was estimated to generate just enough net present cash value over the life of the loans. During FY 2012, the book of business is expected to perform at a -1.52 subsidy rate, significantly better than years past.

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The agency has made several changes to the program over the last few years, which include lowering the amount of money available to borrowers two separate times and increasing the insurance premiums charged to borrowers.

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In the fall, the agency will release a report produced by independent auditors on the strength of the single-family insurance fund, which has been teetering on the need of a bailout from Congress the last few years.

View the report here.

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  • HECMs have several sides even to HUD.  What most forget about is that Ginnie Mae is not a GSE; it is a division of HUD just like FHA.

    Yes, HUD is making more cash revenues from ongoing MIP and has reduced proceeds risk BUT perhaps even more importantly is the home appreciation outlook for more recent endorsements.  While it is great for HUD and may lead to lower ongoing MIP and perhaps higher proceeds, payback to the MMI Capital Reserve Fund must also be considered along with the foregone income on those allocations.

    At least $2.2 billion (plus lost earnings) of the recent bill to save the MMI Fund was the direct result of the projected negative cash flow from the endorsements between October 1, 2008 and September 30, 2011.

    To say that the HECM portion of the MMI Fund is self-supporting is to speak lies, myths, and nonsense.  Industry leaders who propagate such misinformation should be ashamed of themselves. 

  • Volume has fallen, current year’s “book of business” is strong?  A little Financial Assessment here, a little Financial Assessment there,Appraiser valuations trending to 5 percent low instead of 5 percent high, Underwriting standards above and beyond the HUD guidelines.  Maybe this helps explain the abysmal “pull through rate” we’re all experiencing.
    But wait, we still have a “book of business” from 1998 through 2009 to hit the claims fan and hit the fan it will.

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