The partial shutdown of the United States federal government that is currently in effect has become the longest one in history, ending its 31st consecutive day on Monday and having widespread ramifications for over 800,000 federal workers and dozens of federal agencies.
While direct ramifications to the production of reverse mortgage business have been minimal according to originators, the shutdown’s effects on different aspects of reverse business can still be felt, particularly when looking at the ways it has affected operations at the Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA).
As originally reported in late December, HECM endorsements were halted entirely due to the shutdown while customer service remains available with limited staff assistance. The continuing shutdown will create more problems for measuring the health of business through the creation of new endorsements if it continues uninterrupted.
“We won’t have any HECM endorsement numbers because none will be endorsed as long as the shutdown continues barring some change in policy on that front,” John Lunde, president of Reverse Market Insight tells RMD.
Additionally, while HECM loans can be insured for a time, lenders could choose to take a measure of preventive action if the shutdown is prolonged.
“I think it’s interesting that, basically, [FHA is] not really doing any reverse mortgage endorsements. But, the forward program is proceeding. So, the originators are able to do delegated underwriting,” said Laurie Goodman of the Urban Institute, in an interview with RMD.
“HECM loans can be insured as late as six months after closing, but lenders may consider limiting their risk of uninsured loans much earlier if there’s a long shutdown,” Lunde said. “In the simplest case, we’d see a backlog of HECMs caught up in the month or months following an end to the shutdown.”
Originators and proprietary business
Still, reverse mortgage originators say that it’s largely business as usual in their offices, much as they did during the shutdown’s earlier days.
“The shutdown hasn’t affected closing yet, other than that the year is full of new contacts looking for new options in their retirement years,” said Rich Pinnell, an originator with the Vitek Mortgage Group in Redding, Calif.
“It’s business as usual from what I’ve observed,” said Michael Mazursky, owner of iReverse Home Loans based in Carlsbad, Calif. “We get case numbers same-day, and closings haven’t been held up. I was kind of surprised, too, that there isn’t more of an effect with the shutdown. At least it seems that way so far,” he said.
Though not directly in the arena of conducting reverse mortgage business, the shutdown is having an effect on at least one company that operates a competing home equity tapping tool.
“The positive thing is that because we’re buying equity and bringing it into our own funds without having to sell that on, we’re not reliant on Freddie Mac or Fannie Mae to buy out our mortgages, for example,” said Matthew Sullivan, CEO of QuantmRE in an interview with RMD.
“What we are seeing is impact in other areas. We’re in the securities business, so we have a number of discussions going on with the SEC about certain products that we’re rolling out,” he said. “And they’ve gone very quiet!”
Larger financial sector response
On January 11, American Banking Association president and CEO Rob Nichols released a statement urging the stalemated politicians in Washington, D.C. to reopen the government as quickly as possible.
“We urge the administration and Congress to end the standoff before it does any more damage to the economy,” the statement reads. “Our member banks across the country report that the shutdown is starting to take a toll on local communities, preventing customers from securing mortgage approvals and small business loans, while threatening even more harm if the impasse continues.”
Until the shutdown ends, the ABA says that, “banks will continue to offer assistance to customers directly affected including fee waivers, loan modifications and payment deadline extensions depending on individual circumstances.”
The longer the shutdown persists, the larger the consequences will also be for the American economy at-large.
“The revised estimates from the [White House] Council of Economic Advisers show that the shutdown […] is beginning to have real economic consequences,” said the New York Times last week. “The analysis, and other projections from outside the White House, suggests that the shutdown has already weighed significantly on growth and could ultimately push the United States economy into a contraction.”
Former staffers from HUD, FHA and the GSEs weigh in on how to press ahead in this volatile reverse mortgage climate.