The Department of Housing and Urban Development’s (HUD) annual budget proposal for fiscal year 2020, released this week by the Trump Administration, shows positivity in the agency’s reverse mortgage book of business.
The FY 2020 Budget appendix scored the Home Equity Conversion Mortgage (HECM) program with a negative credit subsidy equal to -.08 percent, which translates to a projection for the program to generate a sufficient amount of revenue to offset losses for the 2020 fiscal year’s book of business.
The HECM program is designed to be budget-neutral, without reliance on Congressional appropriations. The negative subsidy displayed in the budget proposal illustrates that the program is generating a small amount of positive cash flow.
“The 2020 Budget requests a limitation of $400 billion on loan guarantees for the Mutual Mortgage Insurance (MMI) Fund,” the budget appendix reads. “The Budget projects insurance of […] $13.6 billion in HECMs, with additional commitment authority available in case these amounts are exceeded during execution.”
The White House first released its budget proposal on March 11, when it was initially revealed that the Office of Inspector General plans to increase its oversight of the HECM program. This is a move being made to ensure, “the program does not pose undue risk” to the MMI Fund, according to the initial budget in brief document.
The budget proposal is seeking up to $400 billion in new single-family loan guarantee authority, an amount equal to the appropriations sought to support all single family programs in fiscal year 2019’s budget proposal one year ago.
