[Update] FHA Reverse Mortgage Insurance Fund Value Falls

The financial standing of the Home Equity Conversion Mortgage program fell during fiscal year 2017, an independent actuarial review of the Federal Housing Administration Mutual Mortgage Insurance (MMI) Fund shows.

The HECM portion of the MMI fund had a projected cash flow net present value of negative $14.2 billion and standalone economic net worth of negative $14.5 billion, according to a report on the fund, released Tuesday and detailed by HUD officials on Wednesday.

The value figure represents a $6.8 billion decline versus 2016, when the economic value was negative $7.7 billion.


Pinnacle Actuarial Resources, Inc., the firm contracted to perform the analysis, also ran a series of different scenarios based on data from Moody’s to generate a wide range of potential values. Under the most generous scenario, the HECM generated about $10 billion in negative cash flow for the MMI; under the worst, the drag was $23.5 billion.

That’s in contrast to the forward portfolio, which saw a net cash flow value of positive $1.89 billion—though Pinnacle’s numbers ranged from as low as negative $36.3 billion to positive $8.7 billion, depending on the Moody’s scenario used to run the numbers on the forward portfolio.

Many in the industry had expected a negative report: The Department of Housing and Urban Development pointed to last year’s negative value of $7.7 billion when instituting lower principal limit factors and updated mortgage insurance premiums in October, claiming that the MMI fund would require a bailout from Congress if officials didn’t step in to stop the bleeding.

Just hours before the news broke, National Reverse Mortgage Lenders Association president and CEO Peter Bell told an audience of industry leaders that the trade group plans to lobby to change the way the FHA calculates the HECM’s impact on the overall fund.

Speaking at the group’s annual conference in San Francisco, Bell said he didn’t necessarily agree with multiple calls — including from researchers at the Urban Institute and Mortgage Bankers Association president and CEO David Stevens — to remove the HECM from the fund entirely.

“That’s really one of the major objectives for us for the year: Try to get us out of the current way of analyzing the program to come up with something that’s better suited to HECM, so we don’t have to worry year-to-year,” Bell said.

The report, initially due out Wednesday, was posted to the HUD website late Tuesday night. The department plans to host a conference call to further explain the results Wednesday morning.

Editor’s note: This article has been updated to reflect information contained in FHA’s annual report to Congress, released Wednesday. The report clarifies some of the information presented in the actuarial review released prior to the full report. 

Written by Elizabeth Ecker and Alex Spanko

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  • As a CPA it is odd to hear an industry leader cry out for a new way for analyzing the profitability of an entity with no information on how that is to be done. The call sounds like nothing more than “no one in the industry likes the numbers so let’s find another way to do them until we like them.” Of course to many the positions of CPAs are not reasonable either. Perhaps Congress will go along but that hardly seems responsible.

    The new value for the portfolio should come as no surprise to observers who carefully follow the actuarial reviews. For several years under the direction of FHA Commissioner (and Acting FHA Commissioner) Carol Galante, funds were taken from other programs in the MMI Fund and placed in the HECM portion without going through a formal request from Congress. Some have stated such transfers are allowed within the MMI Fund rules. To be clear the transfers were fully reported and reasonably disclosed within the actuarial reviews in each of the corresponding years. Nothing, absolutely nothing was done underhanded or under the table that can be discerned from the accounting.

    If the actuaries had taken out the program cumulative transfers from their accounting last year (a net $5.776 billion) and the US Treasury transfer of $1.686 billion, the ending balance of the HECM portion would have been a negative $15.183 billion instead of a negative $7.721 billion.

    Despite the negative $14.223 billion reported by Pinnacle as the new value of the portfolio, HUD is reporting to Congress that the value of the HECM portfolio portion of the MMI Fund as a negative $15.5 billion per Pinnacle; even if Pinnacle is right about the negative $14.223 billion, Pinnacle states that the negative $15.5 billion being reported by FHA is reasonable. The FHA report to Congress on the MMI Fund should be released withing a few days if not a few hours.

    You can find the actuarial review for HECMs in the MMI Fund for fiscal 2017 and the separate actuarial review for forward mortgage programs in the MMI Fund for fiscal 2017 at:


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