In its latest quarterly report to Congress, the Department of Housing and Urban Development indicates its Home Equity Conversion Mortgage program is generating positive cash flow.
Following an annual audit and report to Congress in the fall that showed a shortfall in the reverse mortgage program that could lead to a first-ever Treasury bailout of the Federal Housing Administration, the quarterly report for Q1 2013 shows a negative subsidy rate for the HECM program of -0.92 percent. While the subsidy rate is negative, this means the program is generating positive cash flow at that rate.
The reverse subsidy rate compares with the forward portfolio, which currently carries a subsidy rate of -5.98 percent.
In the first quarter of fiscal year 2013, HUD counted 12,079 reverse mortgages, down 4% from the previous quarter and down a single percentage point year-over-year.
“The credit subsidy rate for HECM loans declined (in absolute value) to -0.92 from -1.52 percent as a result of predictions of lower long-term house price increases and greater shares of borrowers taking full draws against their principal limits at time of loan origination,” HUD stated in its report. “It is
important to note the volume of HECM loans continued to decline in FY 2013 Q1. The quarterly volume of $2.7 billion was five percent below the previous quarter’s volume and almost 20 percent below the year-earlier volume of $3.3 billion
Written by Elizabeth Ecker
