The Trump administration’s proposed 2018 budget for the Department of Housing and Urban Development would eliminate the cap on the number of reverse mortgage loans.
“This change supports the significant improvements that have been made to the program to reduce risk to the MMI Fund and to ensure responsible lending to seniors,” a HUD release explaining the move reads.
Set at 275,000 loans since 2006, the cap has long been a thorn in the side of Home Equity Conversion Mortgage advocates, who argued that the restriction discouraged lenders from entering the reverse market, thus artificially dampening competition.
Back in 2013, National Reverse Mortgage Lenders Association president and CEO Peter Bell called on Congress to lift the cap.
“NRMLA urges Congress to support the continued availability of Home Equity Conversion Mortgages by permanently removing the cap on the number of HECMs that FHA may insure to minimize any possible disruption in the availability of this important personal financial management tool,” Bell told the Senate Banking Committee at the time.
The release announcing the proposed changes hinted at further improvements to come in 2018.
“Since the passage of the Reverse Mortgage Stabilization Act in 2013, FHA has implemented several changes to strengthen and enhance the HECM program; further changes will continue into fiscal year 2018,” the release states.
HUD spokesman Brian Sullivan confirmed to RMD that the department anticipates additional, as-yet-announced amendments to the HECM program in fiscal 2018, which begins this coming October, but also said that he could not elaborate beyond what was stated in the release.
The proposed HUD budget plan has plenty of plaudits for recent changes to HECM program, with language praising Financial Assessment, upfront draw limits, and the growing popularity of adjustable rate products — “which encourage borrowers to access funds as they need them, preserving equity to support them over time.”
“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 release continues.
“HECMs provide a viable option to access equity in their homes. Due to the housing crises and lack of available private sector products, FHA has provided a critical counter-cyclical role in this market, as it has with forward loans, providing access to credit for seniors.”
The full HUD budget proposal projects steady spending on counseling programs for HECMs and other Federal Housing Administration products — $43 million, the same as in 2017 and 2016 — as well as continued negative subsidies for the HECM MMI Fund, meaning the program will keep generating positive cash flow for the government.
It’s important to note that, much like the original budget blueprint that Trump’s team issued in March, the proposal is closer to a wish list than a viable plan for the federal government’s spending in fiscal 2018. The budget would still have to pass both houses of Congress before it reached the willing president’s desk, and politicians across the spectrum have expressed doubt that the plan will survive in its current form, with Republican Senators John Cornyn of Texas and John McCain of Arizona individually dubbing the budget “dead on arrival.”
Written by Alex Spanko