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What will the HECM look like under a second Trump Administration?
Last Tuesday was a political earthquake. President-Elect Donald J. Trump will serve his second non-consecutive term beginning in January 2025. The salient question for reverse mortgage professionals is what impacts his presidency will have on the FHA Home Equity Conversion Mortgage program. Are past results indicative of future performance? We certainly hope not.
Presidents nominate cabinet members to enact the administration’s agenda- selections that are often announced in the months prior to the inauguration. On December 5, 2016, then-President-Elect Trump announced Ben Carson as his choice for Secretary of Housing and Urban Development. While Carson was a skilled neurosurgeon and academic he had no prior experience in housing policy. His selection elicited scrutiny from some members of the Senate during his confirmation hearing.
The most memorable change during the first Trump administration for HECM professionals was the watershed October 2017 reforms to the Home Equity Conversion Mortgage program. Mortgagee Letter 2017-12 released in August 2017 spelled out the changes to the HECM which became effective on October 1st, 2018. Those changes reduced the HECM’s interest rate floor from 5% to 3%, reduced principal limit factors, and increased the initial FHA mortgage insurance premium while reducing ongoing premium rates.
The President’s Budget clearly stated the program needed reforms in fiscal year 2018. Specifically, the May 2017 President’s budget noted, “Since the passage of the Reverse Mortgage Stabilization Act in 2013, FHA has implemented several changes to strengthen and enhance the HECM program; further changes will continue into fiscal year 2018.”
So were the HECM reforms that dramatically curtailed HECM volumes enacted at the behest of the Trump administration? A January 2021 Realtor.com column may shed some light on that question. “I don’t think there was much accomplished because the president wasn’t interested in policy one way or another at HUD. [The president and his team] weren’t interested in getting into the weeds on domestic policy”, said Tony Campbell- a professor of political science at Towson University.
In other words, the particulars of how to meet the administration’s budget directive appear to have been initiated by top HUD leadership under the direction of then Secretary Carson. This would be consistent with the President-Elect’s leadership style to issue the mandate and leave the details to his appointed agency leaders. However, in prepared remarks for an April 2019 Urban Institute forum, Carson praised the reforms in part for leaving a larger equity cushion which would reduce claims against the MMI fund.
And speaking of agency heads, who are some of the potential candidates Trump may select to be HUD Secretary? A few names rise to the top of the pack.
First is Pam Patenaude. She was a Deputy-Secretary at HUD during Trump’s first term, with a long career in housing policy. She has both experience and conservative credentials but might be seen as more moderate.
Next is Robert Marbut – A homelessness consultant known for advocating a “tough love” approach, emphasizing temporary shelters over permanent supportive housing. Trump could pick Marbut if he wants to focus on homelessness policy from a less traditional standpoint.
The third potential candidate is Lynne Patton. Patton served as Trump’s campaign aide and worked in HUD’s New York/New Jersey office. Ultimately Trump’s choice of our next HUD secretary would likely prioritize personal loyalty, alignment with his views on deregulation, and business experience.
In the final analysis HUD, as all other federal agencies, will be functioning under an administration that has vowed to right-size government, curtail cumbersome bureaucratic regulations, and a federal budget strongly influenced by a private sector mindset.
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Shannon Hicks
Editor in Chief: HECMWorld.com
As a prominent commentator and Editor in Chief at HECMWorld.com, Shannon Hicks has played a pivotal role in reshaping the conversation around reverse mortgages. His unique perspectives and deep understanding of the industry have not only educated countless readers but has also contributed to introducing practical strategies utilizing housing wealth with a reverse mortgage.
Shannon’s journey into the world of reverse mortgages began in 2002 as an originator and his prior work in the financial services industry. Shannon has been covering reverse mortgage news stories since 2008 when he launched the podcast HECMWorld Weekly. Later, in 2010 he began producing the weekly video series The Industry Leader Update and Friday’s Food for Thought.
Readers wishing to submit stories or interview requests can reach our team at: info@hecmworld.com.
3 Comments
Actually the Mortgagee Letter 2017-12 dated 8/29/2017 went into effect on 10/2/2017, not 10/1/2018.
Another impact to HUD during then President Trump’s Administration was a reduction in direct communication with those outside of the Department. As to the reason, I will let others speak. Will that practice return in the next few months? Such predictions are outside of my wheelhouse.
Another problem (but from the industry side) was its inability to have any meaningful input into the ML (Mortgagee Letter) 2017-12 decision. Worse, with the change in Administration, the industry failed to gain any changes to that ML in 46 months. It was as if not only a Republican HUD/FHA did not care about the impact of this ML but far worse (in the eyes of NRMLA), that a Democratic HUD/FHA also did not care what happened to seniors, despite what our trade association told us about voting Democratic would mean for our pocketbooks. As the direct result of ML 2017-12, the industry has seen the first, second, third, and fifth worst fiscal years for HECM endorsements since 10/1/2003.
Worse yet, based on HECM endorsement data, HECM case number assignment data, and the expected rate indices, we are in danger of seeing what is likely to be our worst first six month period for ant fiscal year since 10/1/2003. Yet after hearing many reports about the 2024 NRMLA Convention, there was NOT one report on how the industry went out of its way to help the HUD/FHA personnel who did attend care about this industry.
How bad this situation is, not one NRMLA board member or industry member officer has stated getting HUD/FHA to care about the damage that ML 2017-12 has done to those seniors who could previously qualify but due to that ML no longer can is even on their radar. Instead industry leadership is focused on the initial MIP which is an industry thing.
Fiscal year 2024 was the ideal fiscal year for the industry to have addressed the impact of this ML. Why? According to both 1) the Annual Report (HUD’s Annual Report to Congress on the Financial Status of the MMIF as of 9/30/2023 and the fiscal year then ended and 2) the Review (the annual review of the HECM portion of the MMIF for the same time period), the HECM cash position was over $8.6 billion (the same in both the Annual Report and the Review) the highest it has ever been and as to the status of the insurance portfolio although they differ, the Review showed that the Net Present Value of the Future Cash Flows was over $6 billion and the Annual Report showed about half that amount. In a few days, the Annual Report and the Review for the fiscal year 2024 will be released and perhaps that might even be better!!
Why doesn’t anyone care? Maybe the lenders like being poor?
Cathy,
It is not that the lenders do not care (they do) but not many of their actions reflect that care. We need the support of HUD and its officials and in this industry, it is principally the lenders who can gain it.