The Home Equity Conversion Mortgage (HECM) program remains a source of concern for the Federal Housing Administration (FHA), but recent corrective action taken to improve its standing within the Mutual Mortgage Insurance (MMI) Fund is showing progress.
This is according to remarks made by FHA Commissioner and Acting Deputy Secretary of the Department of Housing and Urban Development (HUD) Brian D. Montgomery in a keynote speech at the National Reverse Mortgage Lenders Association (NRMLA) Eastern Regional Meeting in New York on Monday.
“The principal limit factor (PLF) and mortgage insurance premium (MIP) changes in 2017, combined with second appraisal, allow us to better manage program risk with revenue,” Montgomery said. “These changes will help assure the viability of the HECM program going forward. Most recent financial estimates are encouraging, showing that the effect on the MMI fund is improving.”
It was also reiterated that while FHA acknowledges the disruption of the collateral risk assessment and the possibility for some lenders to have to engage in a second property appraisal, that option was far less disruptive to the HECM program compared with “other options that [were] on the table,” Montgomery said.
“I would say I’m cautiously optimistic about the financial viability of the program going forward,” Montgomery said.
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 also shared positive news with the assembled reverse mortgage professionals attending the conference.
“I’m happy to report that the backlog of HECM assignment claims is clear, and has been for several months now,” he said.
The Santa Ana, Calif. and Denver, Colo. FHA homeownership centers deserve “tremendous credit” for this accomplishment, Montgomery said, and current steps being taken to improve the aging technology at the agency will also help to limit these kinds of problems in the future.
Still, enhancing the financial viability of the HECM program is an ongoing concern, Montgomery said.
“In the end, we must protect seniors who depend on the HECM to age in place, as well as for taxpayers not to have to bail out the HECM program,” said Montgomery.
In late 2018, the reverse mortgage portion of the FHA’s MMI Fund showed that the program continued to drag on the overall government-backed portfolio, according to an annual actuarial review. However in March, the HUD annual budget proposal for fiscal year 2020 showed positivity in the agency’s reverse mortgage book of business.
When asked whether or not it was worth exploring moving the HECM program to a fund besides MMI, Montgomery said that all options for enhancing viability for the program should be explored.
“It would take legislation to move the product back to the [previous] fund,” Montgomery said. “I think it makes sense to explore it […] Since it would take legislation to move it, we would most likely have to [ask Congress to] raise our commitment authority.”