FHA Mortgages

New FHA DAS of Single Household Housing Offers HECM Program Replace


Federal Housing Administration (FHA) Assistant Assistant Secretary (DAS) for Single Family Homes Julienne Y. Joseph gave a briefing on the performance of the Home Equity Conversion Mortgage (HECM) program at National Reverse Mortgage this week in front of an audience of virtual reverse mortgage experts Summer meeting of the Lenders Association (NRMLA).

While he mentioned that the endorsement volume remained at over 4,000 units per month through the end of 2021, DAS Joseph mentioned FHA’s awareness of the business that is being done on the front lines of HECM-to-HECM refinancing transactions. She also mentioned that the FHA was aware of the reverse mortgage industry’s concerns about new regulations related to the move away from the use of the London Interbank Offered Rate (LIBOR) index on variable rate reverse mortgages, and reiterated its commitment to to work with industry stakeholders to create a viable future for the reverse mortgage program and the industry.

Industry performance

FHA appears encouraged by the level of performance the HECM program is currently seeing, according to DAS Joseph quoted industry performance data in her speech to a reverse mortgage industry audience at the trade association virtual meeting.

“In the past month, the FHA has insured over 4,000 HECMs from many of you and others in your company,” said Joseph. “And as of June 30, we had more than 418,000 HECMs actively insured for a maximum loss of nearly $ 125 billion. And after a decline in the 2019 financial year, our volume increased again last year. And that includes seeing a significant increase in HECM-to-HECM refinancing activities. “

LinkedInFHA Deputy Assistant Secretary for Single Family Homes Julienne Y. Joseph

Some analysts have expressed concerns about the volume of refinancing transactions related to the issuance of new HECM loans, but FHA’s focus appears to be more focused on the program’s standalone capital ratio. While FHA acknowledges significant progress has been made in comparing the capital ratios published at the close of recent fiscal years, it has some concerns about the performance of the HECM portfolio, she said.

“While the financial performance of FHA’s HECM portfolio has really improved significantly towards the end of the last fiscal year, we need to further investigate and understand the fact that the portfolio still has a slightly negative standalone capital ratio of -0.78% “, Explained Josef. “While there are so many factors that make us unable to predict where we will end fiscal 2021 at the moment, our HECM volume is currently in line with last year’s figures.”

Last year’s HECM volume finished strong, up 27.3% to 44,661 loans for the full calendar year 2020, according to data compiled by Reverse Market Insight (RMI). Still, Joseph indicated that measures to improve the program should be taken as soon as possible.

“There were nearly 37,000 new endorsements for fiscal 2021 through June,” she said. “Aside from future volume forecasts, I don’t think we can wait for the future to come before we act. The pandemic will eventually subside, and I believe we will draw from it a stronger model for the mortgage business in both times of crisis and prosperity. “

Optimistic about working with the reverse mortgage industry

Joseph expressed great optimism among the professional audience in terms of working with NRMLA and other stakeholders to refine the HECM program and acknowledged the work of the association, its members and reverse mortgage experts across the country.

“FHA has a longstanding relationship with NRMLA,” she said. “And while we are not always perfectly coordinated on every subject, we respect the fact that your inquiries are intended to do the right thing for the seniors of our country, and we appreciate that. We appreciate that about you, and you’ve come to the right place. We worked on the first LIBOR move, you only supported our work to publish the HECM section of the Single Family Home Policy Handbook, and we appreciate your support for our recent changes to the Non-Borrowing Spouse Policy. “

While the NRMLA supported the most recent NBS provisions, it sent a letter in the hope of receiving some important clarifications on the guidelines. Nonetheless, Joseph acknowledged that the industry is waiting for more information on how the LIBOR index will be applied to the existing HECM ledger, and also said that further operational changes will continue to be discussed with industry stakeholders.

“It is often said that you need a village to raise a child. So I say it takes all of us to make the FHA’s HECM program a viable one for older homeowners who want or need to use the equity in their homes to sustain and sustain their life after retirement ”, she said. “And I want to tell you that the FHA appreciates the many letters and other correspondence that you are sending us on behalf of your constituency. And we hear you, we listen to you and take your recommendations seriously. So please keep in touch with us, we appreciate that. This is the only way we can improve further if we receive this feedback from all of you. “

Joseph also offered some additional perspectives on the overarching stance of the Biden government towards the HECM program, which appears to be geared towards efficiency and the care of an often underserved population, according to the shared thoughts.

“Like all HUD and FHA programs under the new administration, we need to look at the HECM program, both its benefits and the areas where we have operational challenges,” she said. “But I firmly believe that this challenge offers an opportunity. And I believe that working on them will allow HUD, FHA, and our single family home office to be part of a real, sustainable solution that will advance everyone in the reverse mortgage industry in many new ways. “

Previously, Joseph shared that she had direct experience with the HECM program while working as a lender and had seen firsthand how an HECM could help a couple meet their age goals and add home equity to theirs. to pass on children after settlement of the loan balance. She ended her initial thoughts looking back on that experience.

“Without the FHA’s HECM program, the scenario would be unlikely to have worked out like this,” she said, referring to the retired couple who successfully used an HECM. “That’s why I look forward to working with you today, tomorrow and in the future to make meaningful changes in housing and housing policy that affect the elderly in our country.”