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Trump’s HUD Budget: Good for Reverse Mortgages, Bad for Public Housing

The reverse mortgage industry applauded the Trump administration’s request to permanently eliminate the cap on federally insured Home Equity Conversion Mortgages in its proposed 2018 budget, but the preliminary document spelled far worse news outside of the HECM world.

Peter Bell, president and CEO of the National Reverse Mortgage Lenders Association, lauded the proposed budget’s effect on the HECM industry in a statement e-mailed to RMD late Tuesday; Bell and NRMLA had long lobbied the government to abolish the cap, which has sat at 275,000 total loans since 2006.

“The President’s FY 2018 budget and HUD’s accompanying press release reaffirm a national commitment to FHA’s HECM program, which has benefitted more than one million senior households since it was implemented nearly 30 years ago,” Bell said in the statement.

“While we are still analyzing the budget projections and underlying calculations that went into these numbers, we’re pleased that HUD used this opportunity to underscore significant programmatic improvements that reduce risk to the MMI Fund and ensure responsible lending to seniors.”

The proposed HUD budget also projected negative subsidies for the HECM Mutual Mortgage Insurance Fund — indicating continued positive cash flow for the government — and steady funding for counseling programs. A separate press release about the budget indicated unrestrained support for the HECM program under the current president and HUD leadership, at times directly echoing common marketing language for the reverse mortgage.

“There are many studies that highlight the impact that increased longevity, rising health care and other costs, fewer defined benefit pension programs, and diminished investment values have had on senior’s [sic] income and savings,” the release reads, citing a variety of academic papers in the process. “HECMs provide a viable option to access equity in their homes.”

But aside from the positive news on reverse mortgages, the HUD budget brought doom and gloom for other facets of the housing industry — particularly public housing. The Trump administration’s plan would slash $6.2 billion from the department’s budget, following through on a budget blueprint issued in March, with the deepest cuts coming to federal housing subsidies.

The Community Development Block Grant and the HOME Investment Partnership Program, which provide funding for a wide variety of low-income housing initiatives on the state and local levels, would face the chopping block under the president’s plan.

Rep. Maxine Waters, the California Democrat who serves as ranking member of the House Financial Services Committee, responded to the budget news with a stinging rebuke.

“Donald Trump has once again revealed who he really is, with a cruel and senseless budget that abandons Main Street and the vulnerable,” Waters said in a statement.

“The Trump budget would also punitively raise rents and increase financial instability for the most vulnerable in this country and make it much more difficult for families to make ends meet, including by making it more difficult to pay for rent and basic utilities.”

On the other side of the aisle, Rep. Jeb Hensarling — the Texas Republican who chairs the committee — lauded the cuts to the overall budget, framing the plan as a cure for “Obamanomics.”

“For the first time in almost a decade, a president has proposed a budget that puts us on a path to fiscal sanity,” Hensarling said in a statement. “This budget is a sober document, and I’m pleased President Trump’s proposal takes a long overdue look at redefining the proper role of the federal government.”

Other news from a busy day in Washington

While the HUD budget dominated headlines in the industry yesterday, there were a few other nuggets of information that could have an impact on reverse mortgages. As Time and many other outlets pointed out, President Trump’s budget proposal includes a section that would quietly defund the Consumer Financial Protection Bureau — cloaked in a passage calling for a change in its structure.

The plan calls for $6.8 billion in cost savings related to the CFPB over the next 10 years, but because the CFPB’s budget runs about $600 million a year, the move would effectively kill the bureau — a major policy goal for many Republicans who believe that the agency places undue burdens on companies in the financial services industry. 

Mandatory disclaimer: The president’s budget simply represents his administration’s wish list for government spending, and any finalized budget plan must pass both houses of Congress before it becomes law. The chances of the Hill rubber-stamping Trump’s budget are slim to nil, especially given resistance from the president’s own party; two Republican senators, John Cornyn of Texas and John McCain of Arizona, separately declared the proposal “dead on arrival.” The 2018 fiscal year begins October 1, 2017. 

Outside of the budget, the Department of Labor announced yesterday that its fiduciary rule will take effect on June 9 without further delay. The regulation, which expands the definition of financial planners who must meet the fiduciary standard — meaning they must always act in the best interests of their clients and clearly disclose all fees — had been met with resistance from financial companies, Republicans, and even the president, who ordered a delay of the original implementation date by 60 days.

Labor Secretary Alexander Acosta told the Wall Street Journal and Reuters that there was “no principled legal basis to change the June 9 date while we seek public input,” but also cautioned that the fiduciary rule didn’t necessary track with the president’s “deregulatory goals.”

Written by Alex Spanko