Reverse mortgage lending has improved, but problems remain, says FHA


While Federal Housing AuthorityThe home equity conversion mortgage program has shown improved performance, but there are still several key areas of concern. That’s according to Julien Joseph, FHA’s deputy assistant secretary for single-family housing, who this week shared her take on the space with an audience of reverse mortgage lending professionals.

Joseph enters her new role with rewarding experience – earlier in her career, she worked as a loan officer. On the National Association of Reverse Mortgage LendersAt a virtual summer meeting this week, a spokesman for the Federal Food and Drug Administration (FHA) expressed surprising support for working with the industry to help seniors in need.

Joseph noted that HECM’s approval volume remained at over 4,000 units per month for most of 2021, which is a solid volume for what is still a relatively niche space. But it also quickly got to a few pain points: the growing trend towards HECM-to-HECM refinancing transactions, and go away from the use of the London Interbank Offer Rate (LIBOR) index for adjustable rate reverse mortgages.

Reverse indicators of the mortgage lending industry

FHA is encouraged by the work of the HECM program, Joseph said at the NRMLA conference.

“Last month, FHA insured over 4,000 HECMs created by many of you and others in your organization,” Joseph said. “And as of June 30, we had over 418,000 HECM active coverage with a maximum reimbursement of almost $ 125 billion. And after declining in fiscal 2019, our volume started to increase again last year. And that includes the fact that we are seeing a significant increase in HECM refinancing activity in HECM. “

Some analysts have expressed concerns about the volume of refinancing operations associated with the new HECM lending, but the FHA appears to be focusing more on the program’s autonomous capital ratio. While recognizing that significant progress has been made in comparing capital ratios released at the end of recent fiscal years, FHA remains somewhat concerned about the performance of the HECM portfolio, she said.

“While the financial performance of the HECM FHA portfolio did improve significantly by the end of last fiscal year, the fact that the portfolio still has a slightly negative equity ratio of -0.78% is something that we need to continue to study and understand. – explained Joseph. “While we cannot make any predictions of where we will end up in fiscal 2021 due to a variety of factors, our HECM volumes are right now on par with last year.”

Last year’s HECM volume ended on a high note, up 27.3% to 44,661 loans for the full 2020 calendar year, according to the data. drawn up from A reverse look at the market (RMI). However, Joseph pointed out that action to improve the program should be done as quickly as possible.

“From fiscal 2021 to June, nearly 37,000 new approvals were received,” she said. “Aside from future volume projections, I don’t think we can wait for the future to come before we act. At some point, the pandemic will subside, and I believe that we will derive from it a stronger model for doing mortgage business both in times of crisis and in times of prosperity. “

Optimism about working with the reverse mortgage industry

Joseph expressed great optimism to the industry audience about working with the NRMLA and other stakeholders to help improve the HECM program, as well as appreciation for the association’s work, membership and reverse mortgage lending professionals across the country.

“FHA has a longstanding relationship with the NRMLA,” she said. “While we are not always in perfect agreement with every issue, we respect the fact that your requests are about doing what is right for the elderly in our country, and we appreciate that. We appreciate it from you and you were by our side. We worked on the initial LIBOR transition, you are no more than your support for our work to publish the HECM section of the Single Family Housing Policy Handbook, and we appreciate your support from our recent Non-Borrowed Spouse (NBS). changes in policy… “

Supporting the recent provisions of the NBS, the NRMLA to send a letter hoping to get some key clarifications on the guide. However, Joseph acknowledged that the industry is awaiting further details on how the LIBOR index will apply to the existing HECM ledger, and said additional operational changes will continue to be discussed with industry stakeholders.

“It is often said that raising a child requires a village. So what I’m saying is that we all need to make the HECM FHA program viable for older homeowners who want or need to use equity capital in their homes to sustain and sustain their lives after retirement, ”she said. “And I want to tell you that FHA appreciates the many letters and other correspondence you send to us on behalf of your group. And we hear you, we listen to you, and we take your recommendations seriously. So please keep in touch with us, we appreciate that. This is the only way we can continue to get better is by getting feedback from all of you. ”

Joseph also provided some complementary perspective on the Biden administration’s overarching attitude towards the HECM program, which appears to focus on efficiency and serving an often underserved population in line with shared thoughts.

“As with all HUD and FHA programs under the new administration, we need to consider the HECM program, both its benefits and where we have operational problems,” she said. “But I firmly believe this challenge is an opportunity. And I believe that working on them will allow HUD, FHA and our Single Family Housing Authority to be part of a real, sustainable solution that will move everyone in the reverse mortgage industry forward in many new ways. ”

Formerly Joseph general that she has direct experience with the HECM program, working as a lender, and has seen firsthand how HECM can help a couple achieve their aging goals on the spot and transfer ownership of a home to their children once their claims are met. loan balance. She ended her initial thoughts by looking back at that experience.

“If it weren’t for the HECM FHA program, it’s unlikely this scenario would have played out the way it did,” she said, referring to a couple who have successfully used HECM in retirement. “Therefore, I look forward to working with you today, tomorrow and in the future, just to make significant changes in housing and housing policies that will affect the elderly in our country.”

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