The HECM’s 2021 performance likely best 2020

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It’s less about preserving equity and more about cash flow

With millions of first-time homebuyers finding few suitable housing options and tenants enduring the ravages of rent hikes, some are sitting on a mountain of home equity whilst needing a significant boost to their monthly cash flow.


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  • HECM is an important part of HUD providing housing stability- MMI fund may show marked improvement

  • How To Avoid Reverse Mortgage Lending Traps

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Is the HECM Durable or a Drain?

Despite improvements, the HECM remains a reliable target of fiscal scrutiny

In its Fiscal Year, 2020 Financial Report the Department of Housing and Urban Development called out the HECM program saying it ‘undermines’ the financial soundness of FHA’s Mutual Mortgage Insurance Fund which backs both HECMs and traditional FHA loans. There have also been repeated statements that the program is being subsidized by traditional FHA mortgages- a claim that has been recently challenged in a recent blog post by New View Advisors writing,

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Podcast E648: Some Worried About a Revived CFPB

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Wallstreet isn’t the only one worried about a revived CFPB

“Banks should be prepared for more aggressive enforcement and an expansion of the CFPB’s authority through its rulemakings,” said Rachel Rodman, a former CFPB lawyer who now represents banks as a partner at Cadwalader, Wickersham & Taft LLP in Washington. She expects the agency to be “more likely to bring an enforcement action, pursue novel legal theories and more likely to demand higher penalties.”


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  • Biden has chosen our future Secretary of Housing and Urban Development

  • Here’s how a reverse mortgage can help high-net-worth clients

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Podcast E645: Who will be the next HUD Secretary?

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HECM Program Improves Valuation in FY 2020

A recent New York Times piece speculates who are the most likely candidates to take the helm of the Department of Housing and Urban Development in a Biden Administration

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  • HECM Refinance Boom: What comes after?

  • Private flood insurance may soon be an option for FHA borrowers
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The 2019 HECM FHA Report to Congress

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What you need to know about FHA’s Report to Congress on the Home Equity Conversion Mortgage

[Download transcript]
Each year reverse mortgage lenders, originators and other mortgage market participants eagerly await the release of the Federal Housing Administration’s report to Congress on the financial status of the Mutual Mortgage Insurance Fund.

The good news is that the valuation of the HECM portion of FHA’s portfolio improved by over 50% in a single fiscal year from a negative valuation of -$13.63 billion in 2018 to a negative $5.92 billion in 2019. Why are we seeing such a rapid and marked improvement?

The comments of FHA Commissioner Brian Montgomery during a press call last Thursday may shed some light. “The improvements we’ve begun to put in place in the last two years to stem the losses of the reverse mortgage portfolio, aided by favorable economic conditions, are contributing to some improvements in our reverse mortgage portfolio.”

Pending HECM Changes: The Industry Waits

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Proposed changes linger after Congressional hearing

As one commenter on HECMWorld put it ‘The HECM program got through the hearing all but unscathed’. Very true considering our long history of continued reductions in Principal Limit Factors and restrictions on how proceeds are distributed. That being said, we have several significant HECM changes that have yet to be finalized or announced with an implementation date which has many of our viewers asking when if these changes will be finalized, and if so when.

Of the three most notable changes, two are legislative requiring Congressional approval. The first is an unnamed pending House resolution which would eliminate the national lending limit for HECMs and instead revert back to county-by-county lending limits- or the FHA area maximum loan limit. How such a change would reduce FHA’s risk exposure from HECM loans remains to be seen. Homeowners with higher valued homes in rural counties stand to be impacted the most.

The second would be the removal of the HECM from the


Loan Limits: A ‘What If” Scenario

The potential removal of the HECM’s national loan limit presents disparities in neighboring counties

The updated Housing Finance Reform Plan is ambitious in both its scope and impact on the housing industry and more particularly reverse mortgage industry participants. One of the proposed changes to the HECM (Home Equity Conversion Mortgage) is the removal of the national loan limit and a return to the county-by-county structure of yesteryear. Such a change requires Congressional approval.

In 2019 HUD increased lending limits for most counties across the U.S. However, those unfamiliar with the localized caps may be surprised at local disparities. For instance, the offices of Reverse Focus are located in Shasta County- situated 2 hours south of the Oregon border. The current FHA loan limit for Shasta county is $314,827- a price few homes fall below. Yet just a short 20-minute drive south in Tehama county (where average home sale prices are considerably less) the loan limit is strangely the same- a scenario likely to be replayed throughout the markets of many HECM professionals.

Shasta County, CA 2019 Lending Limit

All which brings us to the question of what if Congress removes the HECM program’s national limit? It would be expected that higher-valued homeowners on both coasts would stand to benefit the most under FHA’s high-cost areas cap under which we’ve functioned since the passage of the Housing & Economic Recovery Act (HERA) of 2008. It would also open a significant opportunity for the creation of private/proprietary reverse mortgages for those with homes that exceed the reduced county limits and fall below today’s cap of $726, 525.

While no PLF (principal limit factor) cuts have been announced, the repeal of the HECM’s national lending limit would cut much deeper for higher-valued homes in lower-cost MSAs.


Housing Finance Reform Report