Trump’s Proposed Budget Would Lift Reverse Mortgage Cap

The Trump administration’s proposed 2018 budget for the Department of Housing and Urban Development would eliminate the cap on the number of reverse mortgage loans.

“This change supports the significant improvements that have been made to the program to reduce risk to the MMI Fund and to ensure responsible lending to seniors,” a HUD release explaining the move reads.

Set at 275,000 loans since 2006, the cap has long been a thorn in the side of Home Equity Conversion Mortgage advocates, who argued that the restriction discouraged lenders from entering the reverse market, thus artificially dampening competition.


Back in 2013, National Reverse Mortgage Lenders Association president and CEO Peter Bell called on Congress to lift the cap.

“NRMLA urges Congress to support the continued availability of Home Equity Conversion Mortgages by permanently removing the cap on the number of HECMs that FHA may insure to minimize any possible disruption in the availability of this important personal financial management tool,” Bell told the Senate Banking Committee at the time.

The release announcing the proposed changes hinted at further improvements to come in 2018.

“Since the passage of the Reverse Mortgage Stabilization Act in 2013, FHA has implemented several changes to strengthen and enhance the HECM program; further changes will continue into fiscal year 2018,” the release states.

HUD spokesman Brian Sullivan confirmed to RMD that the department anticipates additional, as-yet-announced amendments to the HECM program in fiscal 2018, which begins this coming October, but also said that he could not elaborate beyond what was stated in the release.

The proposed HUD budget plan has plenty of plaudits for recent changes to HECM program, with language praising Financial Assessment, upfront draw limits, and the growing popularity of adjustable rate products — “which encourage borrowers to access funds as they need them, preserving equity to support them over time.”

“The HECM program fills a special niche in the national mortgage market and offers critical opportunities for the nation’s seniors to utilize their own assets and resources to preserve their quality of life,” the release continues.

“HECMs provide a viable option to access equity in their homes. Due to the housing crises and lack of available private sector products, FHA has provided a critical counter-cyclical role in this market, as it has with forward loans, providing access to credit for seniors.”

The full HUD budget proposal projects steady spending on counseling programs for HECMs and other Federal Housing Administration products — $43 million, the same as in 2017 and 2016 — as well as continued negative subsidies for the HECM MMI Fund, meaning the program will keep generating positive cash flow for the government.

It’s important to note that, much like the original budget blueprint that Trump’s team issued in March, the proposal is closer to a wish list than a viable plan for the federal government’s spending in fiscal 2018. The budget would still have to pass both houses of Congress before it reached the willing president’s desk, and politicians across the spectrum have expressed doubt that the plan will survive in its current form, with Republican Senators John Cornyn of Texas and John McCain of Arizona individually dubbing the budget “dead on arrival.”

Written by Alex Spanko

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  • Really…the constraint isn’t the investors, the problem is demand. The industry is stuck at 50,000 loans…lifting a meaningless cap isn’t going to do anything.

  • David Shapiro is right on target for todays market. However, are we going to accept the status quo and say we are not going to become a robust productive industry again?

    I say NO, I will not accept that we are not going to come alive and endorsements will bounce back and double or more in the future. Maybe not this year or next but lets start to look beyond.

    We have opportunities and markets out there waiting for us to tap into but will we. Just maybe the amount some originators make on a given loan is to much and complacency has set in!

    20 years ago when I first got into the reverse mortgage space, we did well, mad a good living, in fact many of us made a very good living! One thing was different, we did not make as much on a single loan that is made today, we did volume and made a good living serving our senior citizens well and with pride!

    My point is that the lifting of the cap is very good news in my opinion, for the future. If you are in this business for the long haul my friends, you better look toward the future and how to get here!!!

    John A. Smaldone

    • Instead of worrying about caps, how about HUD pushes the LTV’s from 60% up to 75% since now the HECM programs are guided by the financial assessments requirements which are a close clone to VA loans.There would definitely be a lot more people fitting the higher LTV.

      • Paulieboy,

        If we do not take care of the cap, then say goodbye to the HECM program, period.

        You are like the rest of those commenting in this thread. You commented after I did but before my comment got posted. Please see the comment I uploaded one hour before you.

  • I have no idea what you four (Melinda, David, David, and John) are promoting but all four of you are wrong. Absolutely none of your comments “Nalied it.” I guess none of you have read the law at 12 USC 1715z-20(g) which states the following:

    “(g) Limitation on insurance authority
    The aggregate number of mortgages insured under this section may not exceed 275,000.”

    Currently the aggregate number of endorsed HECMs exceeds 1,000,000. Each year in the past during the budget discussions, Mr. Peter Bell would remind us that he had to go to Congress, hat in hand (as he described it) to try to get the limitation on the aggregate number of endorsed HECMs eliminated or temporarily suspended. Congress in the past has only temporarily suspended the limitation if they had not done at least that, the HECM program would have terminated once the aggregate number of HECM endorsements reached 275,000 or whatever new limit Congress might have decided upon.

    Whenever Congress did not pass a budget but only a continuing resolution, Mr. Bell described going before Congress to make his request more than once in those fiscal years.

    I would suggest that each of you take the time to research facts before making such ridiculous remarks. Ignorance is not bliss; it can be downright embarrassing.

    • Hey Cynic,

      Long time no see!!
      Was it a fiscal yearly cap or cap on all of the agregate of all insured loans under the HECM program that is supposed to be removed ?
      Good news anyways!!

      Cheers my friend

      • Abel,,

        It is an aggregate limitation as stated in the law quoted in my comment two days ago, which Congress had been suspending from budget legislation to budget legislation for about a.decade now.

        The question is not where have I been but where have you been? Your Disqus account shows you have not posted anything through them in four YEARS!!!

        I hope all is well.

      • Still in the business just watching the up and downs of our industry (more downs than up) but still hanging in there.

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