Survey shows what HECM pros expect from HUD
As the final days of summer pass the collective tension of reverse mortgage professionals increases in anticipation of what changes HUD will make to the federally-insured reverse mortgage program. As August or September bring us the changes for the following fiscal year that begins in October we asked you for your top three guesses…
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First, let us look at where expected losses in home values due to the Great Recession hit the hardest. Based on when the date that HECMs were endorsed in that era, most of the loss is in the HECMs accounted for in the G&SRI Fund, not the MMIF. Only HECMs endorsed after 9/30/2008 are accounted for in the MMIF. So while there are, no doubt, some losses from this event reflected in the cohort of HECMs endorsed during fiscal 2009, few of the other cohorts should reflect much loss from this source since very few, if any, of the appraisals related to HECMs endorsed after 10/1/2009 would have been dated before April 2009.
Second, as to the 60% disbursements rule, we may see some erosion of it, if HUD adds recourse and nonrecourse debt unrelated to the HECM collateral to its list of acceptable mandatory obligations. Some expect a Mortgagee Letter on this subject before 1/1/2020.
Third, to avoid the pull forward impact of a floor drop in the expected interest rate or a lowering of PLFs, HUD may delay any notification of a change until the last ten working days of next month. That may seem to be harsh treatment to borrowers; however, it will impede the negative effects for HUD of having closed HECMs pile up waiting for endorsement.