FHA’s MMI Fund Report Explained

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[Download full report] [View 1-minute video summary] [Full Actuarial Review
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A look behind the numbers and factors that shaped the FHA MMI Fund Report to Congress

A recap of FHA’s and HUD’s media conference call, an examination of HECM risks, and how the value of the fund is calculated.

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The HECM May Have to Move Out of FHA’s MMI Fund

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Will the HECM move back to the General Insurance Fund?

HECM & General FHA MMI Fund
HECM & General FHA MMI Fund- Click to enlarge

While the overall FHA MMI (Mutual Mortgage Insurance) Fund is showing positive signs of recovery, the HECM portion of the fund has been much more volitaile than the traditional mortgage segment. With the latest actuarial report showing a negative  economic value some are calling for the HECM to be separated into its own fund

Too Much Too Soon?

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Reexamining Product Design and Use of Proceeds

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The recent overhaul of the HECM program was a watershed event for both the reverse mortgage industry and senior homeowners. The elimination of the Standard Fixed Rate, consolidation to one product, two-tiered upfront FHA premiums and first year distribution restrictions all were born from FHA’s attempt to reign in the HECM program back to its original intent while reducing the risk of defaults and payouts from the MMI fund. The idea was to prevent borowers from using all of their proceeds in the first or early years of the loan which could leave them with little or no financial options once they’ve exhausted all their funds. Also, lower upfront withdrawals and deferred or tenure payments or a line of credit reduce the likelihood that the loan balance would exceed the home’s value in the early years of the loan or when the loan ultimately terminated. Most program changes were spurred by the Consumer Financial Protection Bureau’s report to Congress…