The US Department of Housing and Urban Development (HUD) continues to support the Home Conversion Mortgage Program (HECM) as an option that may benefit certain seniors looking to grow old locally, although there are questions about HECM program policies Department remain ambiguous or unanswered. This is in accordance with a statement provided by the Department to the RMD after specific disclosure about the reverse mortgage program.
Overall, the HUD statement provides a comprehensive policy perspective on the general stance that the HUD under President Joe Biden has towards reverse mortgages in general and the HECM program specifically, however direct questions about current and future plans for the HUD to HECM policy remain unanswered based on RMD correspondence with a HUD spokesperson.
HUD HECM Overview
Since the HECM program is not often a repeated topic of HUD conversation when the Department or its Secretary makes public statements oriented towards housing policy, whenever the HECM program is directly approached by federal government officials at HUD it is always a noteworthy fact occurrence.
However, the HECM program taking a back seat in terms of general policy statements and public discussions is understandable given the other housing policy priorities shared with the public by HUD President and Secretary Fudge, who provided direct input from the Department off notices like Mortgage Letters, few and far between.
Coming to the HUD to gain perspective on the HECM program at this time of recovery for the United States in the wake of the COVID-19 coronavirus pandemic, the Department makes clear that HECM has a place for those members of senior demographics seeking options to they remain in their own home without the need to sell the property.
“The Home Equity Conversion Mortgages (HECM) program plays a unique role in the national mortgage market and provides critical opportunities for the country’s seniors to use their own assets and resources to preserve their quality of life by aging locally,” said a spokesperson of the RMD HUD.
In addition, the HUD also referenced the recently released White House budget proposal, a document asking Congress for a level of funding the Department believes is necessary to adequately support HECM and other mortgage programs in the future. next, the statement said.
“The President’s budget for fiscal year 2022 includes the FHA’s commitment authority for equity conversion mortgages and for individual families insured by the FHA at an appropriate level to maintain programs for the country’s homebuyers, including seniors who will seek an equity conversion mortgage,” the statement said.
Finally, the Department makes a brief reference to the cost of the HECM service in relation to the request for financing from the Mutual Mortgage Insurance Fund (MMI).
“As in previous years, the budget proposal includes Administrative Contract Expenses necessary for program operations, including the HECM mortgage service held in the Secretary’s portfolio,” the statement explained.
While any clarity about HUD’s perspective on the HECM program is welcome, several questions posed by the RMD about the program and issues adjacent to it remain unanswered by HUD’s relatively brief statement. For example, the RMD specifically asked why the Department did not feel the need to make any legislative or administrative requests or recommendations regarding the HECM program in its budget request, a notable deviation from several HECM recommendations made by the Department under previous administration.
The Department also declined to answer questions regarding the possible selection of a new HECM maintenance contractor, a selection that was an apparent priority of the previous HUD leadership, but which was not fulfilled prior to President Biden’s inauguration and the introduction of a new team in the Department. The RMD also sought further clarification of the Department’s leadership gap, with positions such as commissioner of the Federal Housing Administration (FHA) and deputy secretary of the HUD remaining unfilled, with no public nomination of potential candidates for these and other positions.
In the past, Secretary Fudge has addressed the lack of staff in the Department – more particularly in a press briefing she participated earlier this year at the White House – but specific positions were not addressed, nor was there a timetable for when vacancies could be filled. As of now, the most senior FHA official is Assistant Deputy Secretary of the Office of Housing and FHA Lopa P. Kolluri, who is herself addressed the reverse mortgage industry in April at the National Reverse Mortgage Lenders Association (NRMLA) Virtual Policy Conference.
The quote request
The recent federal budget proposal and a congressional annex justifications document on specific elements of HUD crucially indicates that a $180 million request for the MMI Fund is for FHA administrative contract expenses; an expansion of the Good Neighborhood Program (GNND); and a new Home Equity Accelerator Loan (HEAL) pilot. This represents an additional $50 million from enacted levels seen in the previous year, which the FHA first attributes to increased FHA mortgage maintenance costs, particularly highlighting HECM maintenance.
“The main cause of the increase is the growing expenses of maintaining the HECM portfolio maintained by the secretary”, says the document. “In addition, due in part to the increase in the volume of partial claims in response to COVID-19 and disasters, the portfolio of mortgage services held by the secretary continues to grow. The FHA expects to spend significantly more resources to service these mortgages and to dispose of the properties once they are empty. ”
Also, a section dedicated to the HUD in the full budget document reveals that the FHA HECM program is designed to operate at a credit subsidy level of -2.54% in FY 2022. This means that the HECM is designed to generate more revenue for the federal government than it will pay in claims for the HECM business portfolio of the year, marking a substantial improvement in the HECM portfolio’s overall standing and confidence in its HUD and White House solvency.
The HECM program’s estimated credit subsidy level for the remainder of fiscal year 2021 is estimated at -2.39%, which is the same as the last estimate made in the first quarter FHA MMI fund programs report to Congress launched in March. This report detailed that the HECM program was exhibiting an overall budget positive trend, even with gross volume down from the fourth quarter of 2020.