The Mortgage Bankers Association (MBA) hopes to have greater involvement in the affairs of the reverse mortgage business in 2022, aiming to create a working group of its members active in the space to potentially help shape policy for the product category in light of recent indications of positive performance on the part of the Federal Housing Administration (FHA)-sponsored Home Equity Conversion Mortgage (HECM) program.
This is according to Robert Broeksmit, the association’s president and CEO and Pete Mills, its SVP of residential policy and member engagement in a segment that took place at MBA’s State of the Association virtual event in December.
In addition to a trend of positive performance seen in the HECM book of business inside the Mutual Mortgage Insurance (MMI) Fund in recent years, MBA has also seen a higher number of reverse mortgage-related inquiries from its membership, which will lead the association to develop a HECM-related working group and to see what the association might be able to do in the course of its regular work.
MMI Fund: a source of reverse mortgage optimism
A major source of a renewed desire on the part of MBA to engage with reverse mortgages comes from FHA’s Annual Report to Congress, which revealed that the HECM program now stands at a positive capital ratio for the first time since 2015. In addition to that point being of major interest to the reverse mortgage industry itself, it has also seemed to inspire MBA to take a closer look at becoming more involved in the business.
This is according to comments shared during the event by Broeksmit.
“I do want to say that [regarding] HECM – or Home Equity Conversion Mortgage – which is the reverse mortgage program, in the recent report from HUD on the health of the Mutual Mortgage Insurance Fund at FHA, HECMs (which had been a drag on the Fund) actually have a positive reserve now,” Broeksmit said. “So, they’ve benefited certainly from home price appreciation and some of the reforms that Brian Montgomery put in there when he was FHA Commissioner, so it is a program that, if done well, can keep a lot of seniors in their homes.”
Brokesmit would go on to mention the ongoing reputation issues faced by the reverse mortgage industry as a headwind, but also acknowledged that for qualifying borrowers, the products can potentially provide a path for seniors to age in place.
“We do have so many people who are wanting to age in place, and we have this tool available,” Broeksmit said. “It’s gotten a bad rep, partly because of some practices that were less than savory in some parts of the business. Also, just because I think some people didn’t understand it. It doesn’t mean that it’s not a good solution for a really important segment of the population.”
MBA members also seeking additional reverse mortgage involvement
Another motivator for MBA to become more involved in the reverse mortgage industry comes from inquiries among the association’s members, according to Pete Mills.
“It’s interesting that we’ve had a number of our members, just in the last few months, reach out to us on this issue,” Mills said. “There is a reverse mortgage trade association, but there is a real desire to have us really try to focus on this a little bit more. So, we’re going to start I think in the New Year to try to build out a small group of members that are focused on this product, and really try to give maybe a bigger voice to some of the issues.”
Mills also reiterated the improved HECM performance in the MMI Fund as an additional factor that has made reverse mortgages more attractive for the MBA organization.
“Three years in a row now, the HECM program has improved its position from the standpoint of the MMI reserves,” he reiterated. “Our hope is that is a long-term and sustainable trend, and that program can continue to grow. So, we’re going to start taking a look at that in the new year. And, again, it starts with our members as all these issues do. If we can get a core group of really engaged members that are active in that program, and can help us shape policy there, that’s the core of it.”
RMD reached out to representatives of MBA for additional comment, but did not hear back as of press time.
Program changes that led to MBA’s outlook
Broeksmit made mention of HECM program reform efforts led by Brian Montgomery during his time as FHA Commissioner in his initial comments. Montgomery – who also served as the Donald Trump administration’s final Deputy HUD Secretary before the inauguration of President Joe Biden – related the priority of the HECM program during his time in office in a commentary he and his partners at Gate House Strategies wrote for RMD in November.
The corrective action included reverse mortgage program changes spearheaded by then-Acting FHA Commissioner Dana Wade, followed by Montgomery’s establishment of a working group to “to examine risk factors that affect the severity of claims, including to what degree appraisals on the front end were inflated, a dynamic that we believed has had a deleterious effect on the HECM program,” Mongomery and partners wrote.
This is what ultimately led to the establishment of a rule which sometimes requires a second property appraisal in order to mitigate risks to the standing of the Fund. FHA staff in place during both the Trump and Biden administrations have repeatedly said that such changes have been having “their intended effect” on the health of the program. When paired with strong home price appreciation (HPA) in 2021, this culminated in a stronger capital reserve.