The Department of Housing and Urban Development (HUD) has released its Q2 Federal Housing Administration (FHA) Single-Family Mutual Mortgage Insurance (MMI) Fund Programs report to Congress, which details that the Home Equity Conversion Mortgage (HECM) program is continuing a predicted trend of overall budget positivity as predicted by a budget proposal earlier this year.
According to the report’s updated projection of the annual subsidy rates, the budget execution subsidy for the reverse mortgage program sits at -0.15 percent, which shows that the program is actively generating a small amount of revenue for the federal government. The budget subsidy for the forward mortgage program also currently sits at -3.20 percent.
“Mortgages with negative credit subsidies are expected to produce receipts for the federal budget,” the report specifies.
FHA Commissioner and Acting Deputy HUD Secretary Brian D. Montgomery shared last month that he remained “encouraged” that the HECM program will ultimately become a stronger performer in 2019 when compared with 2018.
“I would say I’m cautiously optimistic about the financial viability of the program going forward,” Montgomery said at the National Reverse Mortgage Lenders Association (NRMLA) Eastern Regional Meeting in New York City.
HECM endorsements by count had increased by 11.32 percent from the previous quarter, the report said. HECM endorsement volume, at $2.80 billion for the second quarter of FY 2019, “represents an increase of 12.89 percent from the previous quarter,” the report reads.
The partial federal government shutdown may also have affected HECM endorsements, the report said.
“HECM endorsements likely increased due in part to the partial government shutdown which prevented HECM endorsements to be endorsed for part of the first quarter of FY 2019,” the report reads.
HECM program claims also decreased this quarter by 23.11 percent to 18,236 loans, according to the new report. Lower claims submitted to HUD have the possibility of reducing the program’s burden on the MMI fund, and Commissioner Montgomery also shared at NRMLA East that the backlog related to HECM claims had been recently addressed.
Since the processing of claims can have a substantial disruption in to FHA-approved lenders and on the HECM market’s opportunity to run smoothly at-large, Montgomery reported that the HECM claims backlog – though briefly re-accumulating due to the partial federal government shutdown at the beginning of the year – had been completely cleared, and had been for “several months” as of mid-May.
Read the full report to Congress for more.