Today is Inauguration Day, marking the official beginning of the four-year term of the 46th President of the United States, Joseph R. Biden, Jr. Whether you voted for the incoming president or not, some in the reverse mortgage industry appear to be interested in the changes that the federal government under Biden’s watch could make to agencies and regulations that affect the reverse mortgage industry.
The truth is, though, that while there could be some more visible changes in the broad strokes of the government’s posture, those who work in the reverse mortgage industry at any level shouldn’t expect an abundance of substantive change to take place for a few key reasons, at minimum in the short-term, based on past history and current realities in Washington.
New president means new people, but America’s problems remain
Names in the federal government that the reverse mortgage industry has gotten used to over the past several years — namely HUD Secretary Dr. Ben Carson, Deputy HUD Secretary Brian Montgomery, FHA Commissioner Dana Wade, CFPB Director Kathleen Kraninger, and various predecessors in some of those positions — are inevitably going to be succeeded by new staffers and appointees for their respective positions. As of morning on Inauguration Day, all of the leadership positions on the HUD website are listed as “vacant,” and the president recently unveiled his pick for a CFPB director to succeed the current incumbent.
As much as a new administration can aim to set a course for how certain problems and approaches are tackled, that course will be dictated by the perspectives of both the incoming president and his administration’s various selections. However, even if new people will be overseeing the issues of the country and the federal government’s individual departments, the problems the nation faces do not disappear with an outgoing president.
So, while HUD Secretary nominee Marcia Fudge and CFPB Director nominee Rohit Chopra may take different stances in approaching the problems related to seniors’ housing and finance issues, many of the major problems hitting housing and consumer protection as a result of the COVID-19 pandemic will need to take up more comparative bandwidth when examined alongside other, less pressing concerns up to, and including the Home Equity Conversion Mortgage (HECM) program.
In his campaign platform, many of now-President Biden’s positions were oriented around securing a substantive retirement for older Americans by putting the Social Security program on a path to greater solvency; bolstering or establishing programs that encourage saving for retirement from an earlier age; and providing help for older Americans who want to keep working past a traditional retirement age by curbing age discrimination in the workplace and expanding the Earned Income Tax Credit (EITC) to older workers.
Biden made no mention of the incorporation of home equity into retirement plans in his campaign platform, but the HECM program will of course be under his administration’s purview for the next four years. Every presidential administration since the program was introduced has affected its policy in some way, and Biden’s will be no different in that regard.
It can be easy for anyone to be distracted by an executive transition at the highest levels of our government, and to think that even something as long standing as the HECM program will be instantaneously prone to changing political headwinds. The last time there was a transfer of power, though, it took about a month before reverse mortgage companies found themselves affected by the changing of the proverbial guard.
Major disruptions did come late in the first year of the Trump administration in the form of changes to principal limit factors (PLFs) in October of 2017, but those changes also came without many of the current problems the nation is facing: namely the COVID-19 pandemic, economic uncertainty and individual states hoping for other kinds of more immediate housing relief.
Industry lobbyists are unconvinced
As previously detailed on RMD, a trio of Washington, D.C. lobbyists who have a history of working with the reverse mortgage industry are unconvinced that the change to the Biden administration will have an abundance of material impact on the reverse mortgage industry, particularly while so much political bandwidth is being taken up by the pandemic, as well as other issues.
“From a split government perspective […] I think you’re going to potentially see very constructive legislation and engagement on appropriations bills that we haven’t had before, which obviously can have great effect on the HECM program if provisions are in there,” explained David Horne, a government relations expert and former chief of staff for the U.S. Department of Housing and Urban Development (HUD) in November. “I’m not sure how much there’ll be in terms of FHA or housing legislation. I think the focus will remain on the GSEs, Freddie and Fannie to the extent that they’re starting to move out of conservatorship.”
Some of the issues raised within the last few months, up to and including the January 6th storming of the United States Capitol and yet another impeachment proceeding in Congress will also likely sponge up a considerable amount of the attention in Washington, so industry eyes will undoubtedly be focused on any policy changes at the Department of Housing and Urban Development (HUD) or the Consumer Financial Protection Bureau (CFPB) that could have the potential to affect the reverse mortgage industry as a consequence, instead of by design.
Ready to work in good faith
RMD is fortunate to have the attention of people who work across all levels of the reverse mortgage industry. Some of those people have, in the past, interacted with government officials in Washington about the program, and are ready for potential impacts that government changes could have on the industry. However, those changes are not exactly anticipated to happen anytime soon.
The posture we hear about from people who would know is one of readiness: the industry stands willing to work with anyone who engages with reverse mortgage stakeholders in good faith, and who are focused on the wider mission of assisting older Americans in retirement. After all, there are a lot of question marks surrounding some new, unknown elements of the equation.
Some of those unknowns include potential new holders of both the HUD secretary and CFPB director positions, the ongoing aim to find a new HECM servicing contractor and a Mutual Mortgage Insurance (MMI) Fund that has shown an improvement in the reverse mortgage portfolio, but which was still in the red according to HUD’s most recent annual report to Congress (though its negative value over the past year has been almost entirely diminished, sitting at approximately -$500 million compared with the -$5.92 billion figure recorded in 2019).
When politicians have gone on the record about their reverse mortgage perspectives, many of them have been surprisingly positive in recent years as RMD has detailed before. Even former HECM program skeptics at times have described a turnaround in perspective.
“There have been years where I have been concerned about the [reverse mortgage] program, and wondering whether or not it was doing what it was supposed to do,” said Rep. Maxine Waters (D-Calif.) in 2019 at a House subcommittee hearing. “And again, let me reiterate that I do recognize that it has value that must be protected, and value that must be extended so that we make sure we’re providing the kind of safety and security that our seniors need and deserve.”
The bipartisan appeal was emphasized in that same 2019 proceeding by Rep. Lance Gooden (R-Tex.).
“The HECM program was created to allow seniors to access their real estate equity, while making it possible to stay in their homes,” Gooden said at the time. “Even today, its primary goal is guided by the good intention of allowing seniors to age in place, and protecting a post-retirement lifestyle without the need of selling their home.”
With a greater level of understanding among financial professionals and congressional representatives, the industry will want to build on any successes earned through its tireless information and educational efforts over the course of the last several years. If Democratic and Republican leaders wanted to find a source of bipartisan compromise on the legislative front, they could potentially turn their attention to HECM program reforms, according to former FHA Commissioner Dana Wade.
“In terms of Congress working on comprehensive reform, I have hope,” then-Commissioner Wade told RMD in November. “I know this is a discussion that has continued for a long time, I think too long. I think it is time for Congress to act. I think there were some great reforms that we’ve proposed as part of our housing finance reform report, including looking at a standalone HECM capital ratio, that really should be considered on a bipartisan basis. There’s nothing political or partisan about it. It’s really all about fiscal stewardship.”
The industry has said repeatedly that it is ready to take on both the new challenges and opportunities that 2021 will bring to the table, and RMD will endeavor to be there every step of the way in the months and years to come. Stay tuned.