Trump’s Budget Would Lift Reverse Mortgage Cap, Bring Changes in ’19

Once again, the Trump administration has proposed a permanent end to the cap on the number of reverse mortgages — while also hinting at additional changes to the Home Equity Conversion Mortgage program for fiscal 2019.

“The Budget will again propose permanently lifting the cap of 275,000 loan guarantees to provide further stability for the HECM program,” the White House wrote in its proposal for the fiscal 2019 Department of Housing and Urban Development budget. “This proposal reflects the significant improvements that have been made to the program to reduce risk to the MMI Fund and to ensure responsible lending to seniors.”

The president and his Office of Management and Budget — led by acting Consumer Financial Protection Bureau director Mick Mulvaney — made the same proposal in its fiscal 2018 blueprint, issued last May.


The full document, titled “Efficient, Effective, Accountable: An American Budget,” is a largely ceremonial document; Congress just last week passed a new two-year budget plan, which the president signed.

Still, the Trump budget plan provides a window into the administration’s priorities and goals, and the HUD section dedicated a significant amount of attention to the HECM.

“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 document reads.

The Trump administration also heralded recent changes to the program, including the development of Financial Assessment and the new mortgage insurance premium structure, which the White House and HUD said helped to encourage lower draw amounts.

Without mentioning specifics, HUD said that officials are exploring further changes to the program for fiscal 2019.

“The president’s FY19 budget reaffirms this administration’s support of the federally insured reverse mortgage program that has helped more than a million senior homeowners supplement retirement savings and age in place,” National Reverse Mortgage Lenders Association president and CEO Peter Bell told RMD via e-mail. “Language to permanently eliminate the cap on the number of HECM loans that can be insured by FHA is a welcome signal of President Trump’s and HUD Secretary [Ben] Carson’s long-term commitment to sustaining the HECM program.”

Other HUD highlights

Overall, Trump’s preferred plan would see a 1% increase in discretionary HUD funding for a total of $41.1 billion. In addition, the government would have the authority to issue $400 billion in loan guarantees, with $12 billion set aside for HECMs.

The plan would also allow HUD to institute varying regional HECM loan limits depending on the location of the property, as well as pathway for leniency regarding spousal foreclosures.

“This provision gives the Department discretion to make deferrals on HECM loans and provides program flexibility to exempt lenders who would otherwise by required to immediately foreclose upon a living spouse,” the document reads.

To shore up the state of the Federal Housing Administration’s information technology systems, Trump proposed a new IT fee for lenders that would generate up to $20 million for improvements — or the equivalent of about $25 per FHA-backed loan

The FHA’s origination systems experienced 73 outages during 2017, the Trump administration noted, with some of its programs dating back more than 40 years.

“This places the MMI fund at significant risk, and hampers FHA’s ability to effectively partner with the industry,” the administration pointed out.

The White House plan represents a starting point for negotiations with Congress; the New York Times noted that the plan “has little to no chance of being enacted as written.”

Written by Alex Spanko

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  • The first part of this sentence should be of great concern to all….. Remember back in the day when this was in effect? And the affect it had…not too good.

    “The plan would also allow HUD to institute varying regional HECM loan
    limits depending on the location of the property, as well as pathway for
    leniency regarding spousal foreclosures.”

    • Mr. Green,

      No I have never seen this. What we had before was the use of the Freddie Mac lending limits by county. I have never seen this by regional HECM loan limits. Perhaps you can explain what precisely that means.

      • Mr Veale,
        Whether they were Freddie Mac or Mary Lou’s, or a Boy Called Sue, lending limits. I’m sure you remember when this industry had lending limits by county. I sure do and at least in my neck of the woods it wasn’t such a good thing.

  • Overall, this is good news. Sure, lifting the cap on how many reverse mortgages can be endorsed in a year may not seem to be a big thing today. However, in the long run it will play a very important roll in our industry.

    The major physiological effect that lifting the cap on how many reverse mortgages can be endorsed in a given year is tremendous! It shows us along with other contemplated changes on the horizon the importance this administration places on the HECM’s survival for our seniors!!

    The other point that Bob Green points out is HUD’s willingness to institute varying regional HECM loan
    limits, as well as the pathway for leniency regarding spousal foreclosures!

    Another important point in this article is the possibility of a 1% increase in discretionary HUD funding and the government having the authority to issue $400 billion in loan guarantees, with $12 billion set aside for HECMs!

    This is very good news in my opinion. It should give us all an optimistic outlook on the future of the HECM!

    John A. Smaldone

    • John,

      This is an annual cap. It is a lifetime cap that we surpassed in mid fiscal 2007. The law can be found at 12 USC 1715z-20(g) which states: “The aggregate number of mortgages insured under this section may not exceed 275,000….”

      Mr. Peter Bell has stated budget after budget and continuing resolution and continuing resolution that he has had to go hat in hand time and time again to remind Congress not to forget to 1) once again suspend the cap, 2) increase it, or 3) hopefully, end it. For the last decade plus, Congress has chosen number one and only suspended the cap until the next budget or continuing resolution. This is one of the key services the staff at NRMLA has provided the industry, the right to endorsements for whatever period, Congress in its wisdom wanted to give us.

      This is an immediate need, not a need in a year when we have over 275,000 endorsements.

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