The US Department of Housing and Urban Development (HUD) has a series of legislative priorities for 2022, and one of them appears to be a substantial reform of how the Home Equity Conversion Mortgage (HECM) program works. That’s according to a public notice posted on the website of the Office of Information and Regulatory Affairs (OIRA), a division of the White House’s Office of Management and Budget (OMB). The notice was first spotted by RMD’s sister publication, HousingWire.
Reform of the reverse mortgage program has long been a reality in space, due to legitimately discovered shortcomings in how the product serves its borrowers through lingering reputation issues that have prompted regulators to watch more closely. the reverse mortgage industry and the businesses that operate within it.
When contacted to comment on OIRA’s entry and the priorities HUD maintains for reverse mortgage program reform, a HUD representative told RMD that the ministry had nothing more to do. offer for public publication.
The proposed rule published for reverse mortgages
While the OIRA entry does not detail any specific program reform or any priorities maintained by the HUD for 2022, it does draw attention to some of the fiscal instability that the HECM portion of the Mutual Mortgage Insurance (MMI ) has undergone in recent years as a corroboration of the need for curriculum reform.
“This proposed rule would revise HUD’s policy regarding the Home Equity Conversion Mortgage Program (HECM),” the entry begins. “HECM was designed to provide seniors with a mechanism to use the equity in their home. This program has come at a cost to the Federal Housing Administration (FHA), as HECM claims have cost the Mutual Mortgage Insurance Fund billions of dollars in recent years, but also created operational costs and a complexity in programmatic requirements that limited accessibility to the program for the population it was intended to serve.
Although the specificity of the OIRA entry is usually limited, some idea of information related to the issues that HUD focuses on for the HECM program revolves around the concepts of extended borrower protections and HECM services, both of which are sources. long-standing debate within the circle. the reverse mortgage industry and its direct stakeholders.
“The FHA needs to develop changes that ensure the program is financially sustainable while meeting the needs of the elderly,” the entry said. “To address these concerns, HUD proposes to make certain changes to the HECM program, including providing additional protections to borrowers aligned with program objectives, ensuring consistency of service requirements across the portfolio, provided that mortgagees retain the service of HECM rather than assigning it to HUD and codifying other previously published provisions under the Reverse Mortgage Stabilization Act. “
Fiscal sustainability, recent past reform efforts
Last month, the FHA released its annual report to Congress which detailed that the reverse mortgage program within the MMI fund had reached positive territory for the first time since 2015. However, the proposed rule posted on the website of OIRA does not mention the recent change. in the status of the HECM program within the Fund, focusing instead on the years in which HECM operated in negative territory between 2016 and 2020.
In recent years, efforts to reform the reverse mortgage program have taken place among Democratic and Republican politicians. In late 2019, the Donald Trump administration included a series of potential reforms to the HECM program in a housing finance reform plan submitted by the US Department of the Treasury. This plan encouraged three administrative proposals, including the development of new HECM service standards and the elimination of HECM refinancing at HECM. One legislative proposal the plan made was to revise the loan limit structure in the HECM program to reflect variations in local housing markets, as opposed to operating from a national HECM loan limit.
Also in 2019, two Democratic members of the US House of Representatives who sat on the House Financial Services Committee each proposed different pieces of legislation aimed at reforming the HECM program. A bill, drafted by then-Rep. Lacy Clay (Mo.), intended to “conform the maximum loan limit for FHA insured reverse mortgages to be consistent with the zone maximum loan limits for FHA insured mortgages, and to other purposes “, the draft reads following the recommendation. in the Treasury proposal.
The second bill, drafted by then-Rep. Denny Heck (Washington), is said to have asked mortgage creditors to inform spouses who are not eligible borrowers (NBS) of opportunities that would allow them to stay in the house; providing qualifying NBS with “deferral of status due and payable due to the death or termination of residence of the borrowing spouse, as applicable, as long as the qualifying non-borrowing spouse is eligible; And the requirement that lenders “take appropriate loss mitigation measures” by offering payment plans for delinquent property charges and by matching borrowers at risk of default with HUD-approved advisers.
Any programmatic or legislative attention that was given to the reverse mortgage program in 2019 was effectively wiped out by the COVID-19 coronavirus pandemic. Representatives Clay and Heck no longer sit in the House due to Clay losing his seat to a main challenger and Heck’s decision to run for and ultimately win the seat of state lieutenant governor. from Washington.
HUD officials told RMD shortly after President Joe Biden’s inauguration that the Trump administration’s reverse mortgage priorities were not necessarily the same as those of the Biden administration.
Read it entry to OIRA.