Blindsided industry leaders ask for stability
Several reverse mortgage industry leaders are pointing out the need more stability for the Home Equity Conversion Mortgage in the wake of the October Surprise, that is HUD’s unanticipated sweeping reforms enacted October 2nd. While the changes were announced in August they raised the alarm for many who felt blindsides by the sweeping change.
Being privy to the stark numbers revealed in the latest actuarial report for the HECM program, HUD confirmed the review was a major factor in deciding to…
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The average NPV per HECM remaining in the MMI Fund as determined by the FHA is
-$37,471.
Here are those same averages for selected years of endorsements showing number of HECMs for each such year still active in the MMI Fund as of 9/30/2017 along with the related average NPV as determined by FHA from data reported by the actuaries in Table 5 on Page 13 of their annual review for fiscal 2017 as well as by FHA in Table B-22 on Page 103 of its annual report on the MMI Fund.
Fiscal Year of
Endorsement .. Active HECMs .. NPV per HECM
2014 …………….38,310…………….-$18,872
2015……………..47,461…………….-$22,123
2016……………..44,983…………….-$28,744
2017……………..54,584…………….-$35,926
All Years……….412,822……………-$37,471
If isolate the per HECM NPV losses of fiscal years 2014 and 2015 (calling it Group A) and compare those to the same NPV losses for fiscal 2016 and 2017 (calling it Group B), what becomes apparent is did Financial Assessment do much to stop NPV losses in Group B when compared to Group A.
Essentially all HECMs endorsed in fiscal years 2016 and 2017 while almost none of the HECMs endorsed in fiscal years 2014 and 2015 underwent financial assessment. Unless there are other factors that come into play, it seems financial assessment had hardly ANY impact on the negative NPVs of Group B. If anything it could very well be argued that financial assessment increased such losses.