While the overall FHA MMI (Mutual Mortgage Insurance) Fund is showing positive signs of recovery, the HECM portion of the fund has been much more volitaile than the traditional mortgage segment. With the latest actuarial report showing a negative economic value some are calling for the HECM to be separated into its own fund…
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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.
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3 Comments
What will be the effect on the HECM program if it is switched to the General from the MMI. Will it make it harder to attract investors. Will it reduce the amount of money available to LO and to RM companies?
Mr. Wills,
As a CPA, I have noticed no difference in how the program has fared. Yet, as we have all noticed, there is far more transparency, accountability, and concern about the program due to both audit reporting and the required separate actuarial review in the MMI Fund. Certainly Congress has been able to better analyze the portion of the HECM program in the MMI Fund.
If we were forced into a new separate fund as former FHA Commissioner Stevens presents, we would need an immediate infusion of $15.2 Billion in funds. The reason is that FHA allocated a net $5.776 Billion from the forward mortgage programs in the MMI Fund into the HECM portion and then on top of that HUD took $1.686 Billion from the US Treasury to bolster the MMI Fund that was all allocated to the HECM portion only.
While many question the motives of Mr. Stevens in particular when speaking of a bifurcation of the MMI Fund, one must realize that the overwhelming membership of the MBA comes from the forward mortgage portion of the mortgage industry.
It is being suggested by at least one very prominent former industry leader of all the adjustments that could be made to the HECM, the next logical step is to raise upfront MIP to at least 2% from 0.5% but leave the 2.5% rate alone.
The normal HECM hearings held in Congress should be very, very interesting. We will no doubt get a very clear picture of how Congress may address the mess that the industry now finds itself. It is obvious that the Reverse Mortgage Stability Act of 2013 has done little to stabilize the financial position of its intended beneficiary, the HECM program (not borrowers or the industry)!!!
12 USC 1715z-20(h)(3) states (as added by the Reverse Mortgage Stability Act of 2013):
“(h) Administrative authority
The Secretary may—
(1) … and
(3) establish, by notice or mortgagee letter, any additional or alternative requirements that the Secretary, in the Secretary’s discretion, determines are necessary to improve the fiscal safety and soundness of the program authorized by this section, which requirements shall take effect upon issuance.”
great idea….it doesn’t belong in the general pool of risk..it is not a “low to moderate income” first time homebuyer or regular borrower risk profile in any way, shape or fashion. This program has characteristics completely different from the general risk pool and has no business being melded into it without consequences. Far better to recognize the program for what it is and accept the risk profile….and allow for it to some extent in an effort to provide an additional safety net for older homeowners. The general FHA forward mortgage loan has an “unearned premium refund” provision that the HECM does not, the HECM has a rather bizarre credit line growth feature that subjects the lender to unmanageable risk, hence a much different risk profile element, the borrowers are a “protected class”….oddly enough, so we are expected to have a different perspective of the risk/benefit tradeoff. If properly utilized, the HECM eliminates or reduces negative cash flow for homeowners which should reduce foreclosure and displacement of older citizens, it should reduce reliance on entitlement programs like social security and medicare and medicaid for maintenance of retirees well being. I could go on and on…..maybe this is a start to finally engage in a meaningful discussion of what this program is and how it can help balance the load of dealing with our nation’s burgeoning ranks of retiree homeowners.