The Federal Housing Administration (FHA) has risen to the occasion in responding to the impacts of the COVID-19 coronavirus pandemic, and has a series of key priorities for the Home Equity Conversion Mortgage (HECM) program that it is aiming to pursue in 2021 related to greater incorporation of technology, and further completing the 4000.1 policy handbook to include more reverse mortgage information.
This is according to Joseph Gormley, deputy assistant secretary for single family housing at FHA in a presentation at the National Reverse Mortgage Lenders Association (NRMLA) Virtual Annual Meeting & Expo. Gormley, who was appointed to his position at the beginning of 2020, sought to provide a robust, granular perspective on FHA’s activities as it relates to the reverse mortgage program for the meeting’s reverse mortgage attendee audience.
‘Rising to the occasion’ for COVID-19
Similarly to Deputy Secretary of the U.S. Department of Housing and Urban Development (HUD) Brian D. Montgomery at the start of the conference, Gormley recounted many of the different relief measures for FHA borrowers during the COVID-19 coronavirus pandemic, describing that FHA recognized the necessity of stepping up to the plate at a time when many borrowers were in need of assistance as the financial impacts of the outbreak became clear.
“Many people much more eloquent than I have commented on the unique challenges presented by the COVID-19 pandemic during the previous eight months, but I believe FHA has risen to the occasion to help borrowers affected by the pandemic and keep the market for FHA insured loans running smoothly,” Gormley said.
Echoing the optimism expressed by Deputy Secretary Montgomery, Gormely described the further implementation of FHA Catalyst software features as a major new efficiency for the reverse mortgage industry, though industry players should still make sure that they are performing all the regular due-diligence that comes with the submission of a HECM case binder.
“By utilizing FHA Catalyst, endorsement times have decreased by approximately 20%,” Gormley described. “Which means our homeownership centers are endorsing loans 20% faster with the new technology. But as with all technology, what has entered into the system impacts its output. It is so important for HECM lenders to ensure that the files they submit for endorsement are as complete and as error-free as possible, so they don’t get returned.”
When a file submitted for endorsement is returned, FHA issues a lender a notice of return (NOR) which requires the error to be cured before a case file can be resubmitted, which takes additional time and adds further expense.
“Therefore, it is much more cost effective to make sure the files are complete at submission,” Gormley said.
FY 2021 priorities: HECM stability
Priorities for HUD in fiscal year 2021 was also shared by Deputy Assistant Secretary Gormley, led primarily by a desire to further stabilize the HECM program inside the Mutual Mortgage Insurance (MMI) Fund.
“In accordance with HUD’s housing finance reform plan, FHA’s number one goal is to help make its HECM program more financially stable,” Gormley said. “However, because of the COVID-19 national emergency and the ‘all hands on deck’ approach we’ve had to take to maintain the day-to-day business of both our forward and reverse portfolios. We had to shift priorities and some things were moved to the backburner. But going forward in fiscal year 2021, FHA, among other priorities, plans to continue working with NRMLA and the reverse mortgage industry as a whole to get our HECM programs on a more sustainable footing.”
Gormley also addressed FHA’s position related to the impending LIBOR/CMT rate index transition, reiterating a position of leadership on the topic by the Department first communicated by Deputy Secretary Montgomery.
“We’re all aware that Ginnie Mae issued an APM that provided direction for its programs on the transition a couple months ago, and I know there’s a lot of interest in the marketplace and amongst NRMLA members with regards to what FHA is doing,” he said. “But rest assured, we’ve been working with the ARRC and others who are very invested in this process.”
Reverse policy in the 4000.1 handbook
Gormley also shared another major priority for the agency, this time revolving around the FHA’s Single Family Housing Policy Handbook 4000.1 (SF Handbook). Online materials describe the SF Handbook as “a consolidated, consistent, and comprehensive source of FHA Single Family Housing policy,” but Gormley related that in fiscal 2021, the hope is to truly make it a one-stop reference of policy which affects both forward and reverse mortgages.
“One of our other major priorities for fiscal year 2021 is the completion of the single family housing policy handbook, also referred to as handbook 4000.1,” Gormley shared. “This is another area in which we can share good news: the forward section of handbook 4000.1 continues towards completion, and the industry can expect new updates in the coming months. We’re also hard at work in completing the reverse mortgage section of the handbook, and it is our hope that we can finally fulfill our dream of having a complete, single source of FHA single family forward and reverse policy sometime in fiscal year 2021.”