FHA Commissioner Montgomery: HECM Program on the Right Track

Brian Montgomery, FHA Commissioner and Acting Deputy Secretary of the Department of Housing and Urban Development (HUD), said the home equity conversion mortgage (HECM) program has improved its standing with the home Mutual Mortgage Insurance Fund after recent corrective actions.

Montgomery spoke Monday at the National Reverse Mortgage Lenders Association (NRMLA) Eastern Regional Meeting in New York.

“The principal limit factor (PLF) and mortgage insurance premium (MIP) changes in 2017, combined with second appraisal, allow us to better manage program risk with revenue,” Montgomery said. “These changes will help assure the viability of the HECM program going forward. Most recent financial estimates are encouraging, showing that the effect on the MMI fund is improving.”

While the FHA acknowledges the disruption of the collateral risk assessment and the possibility for some lenders to have to engage in a second property appraisal, it was still less disruptive to the HECM program compared to other options.

“I would say I’m cautiously optimistic about the financial viability of the program going forward,” Montgomery said.

Montgomery did share positive news, noting the “backlog of HECM assignment claims is clear."

Reverse Mortgage Insight (RMI) reported earlier this year that HECM endorsements dropped by 35.7% in March 2019, down to 2,573 loans. In their report, RMI stated “That is certainly a lot, but is actually very close to the average for December through February we discussed last month as a way of reducing the noise of the government shutdown shifting volume between those months. Now that we finally have a clean month it looks like the last five months on average have all been right around this month’s level.”

By region, the Pacific/Hawaii region saw the smallest drop, down 18.6%, or 783 loans. RMI notes that this region was still up 15.7% from the December through February average. The Southwest had the biggest drop, but still came out 10.1 percent higher than the December through February average.

DS News reported earlier that, according to LendingTree and data from the Federal Housing Authority’s HECM program, HECMs originated in the 100 studied cities at an average rate of 7.1 loans per 1,000 homeowners over the age of 60 between 2012 and 2017. The top city, Virginia Beach, boasted a rate of 13.8 loans per 1,000 homeowners over the age of 60.