FHA Commissioner doing ‘deep dive’ to isolate source of HECM losses
The following commentary does not represent the official position of Reverse Focus, Inc.
Last October just days after the agency enacted substantial cutbacks to the Home Equity Conversion Mortgage, HUD Secretary Ben Carson spoke before the House of Representatives saying “the changes we’ve made will sort of stop the bleeding in terms of new reverse mortgages”. However, despite rising home values, numerous program tweaks and lending ratio reductions the program continues to raise concerns among lawmakers who see increasing liabilities in FHA’s Mutual Mortgage Insurance Fund.
FHA Commissioner Brian Montgomery addressed this challenge in a recent interview with Reverse Mortgage Daily “We are digging deep in the portfolio to find out of the problem is on the front end or the back end,. My sense is that it’s more on the back end in terms of the losses we are experiencing.” Commissioner Montgomery is rightfully concerned that many of the HECM program’s ‘losses’ may be on the back end since HECM liabilities continue to mount even after the enactment of the financial assessment, principal limit or lending ratio reductions, and first-year distribution limits.
One area that FHA intends to closely examine is the appraisal process- more specifically to see if home values are being artificially inflated. The concern is heightened since properties with a HECM tend to depreciate more quickly than homes with traditional mortgages, said Montgomery. FHA will be comparing existing appraisals with AVM