Biden budget proposal gives insight into new administration’s reverse mortgage priorities
President Joe Biden’s administration submitted to Congress on Friday afternoon its federal budget proposal for fiscal year 2022, with a figure of $ 6 trillion with an abundance of new spending programs aimed at accelerating states’ economic recovery -United after suffering the effects of COVID. -19 coronavirus pandemic.
However, the legislative and interim proposals set out in the Department of Housing and Urban Development’s (HUD) Congressional justifications for the White House budget proposal specific to the FHA Fund help to provide insight into the new administration’s perspectives on the issue. home equity conversion mortgage (HECM), and where its strengths and weaknesses lie compared to the outlook of the previous administration.
The recent federal budget proposal crucially states that the $ 180 million request for the Mutual Mortgage Insurance Fund (MMI) is for Federal Housing Administration (FHA) administrative contract spending; an extension of the Good Neighbor Next Door (GNND) program; and a new Home Equity Accelerator (HEAL) pilot project. This is an additional $ 50 million from levels promulgated the previous year, which the FHA attributes primarily to increased costs for the FHA mortgage service, largely distinguishing the HECM service.
Biden budget for MMI Fund, HECM program
Most of the increase in the figure requested for the MMI Fund appears to be attributed to higher costs associated with the HECM service, according to the Congressional Rationale document released by HUD in conjunction with the administration budget.
“The main cause of this increase is the increasing expenses related to the service of the HECM portfolio held by the Secretary”, one can read in the document. “In addition, in part due to the increased volume of partial claims in response to COVID-19 and disasters, the portfolio of mortgage services held by the Secretary continues to grow. The FHA plans to devote significantly more resources to servicing these mortgages and disposing of the properties once they become vacant. “
In addition, the budget also calls for a $ 400 billion limit on loan guarantee commitments, which “includes sufficient authorization for insurance of single-family term mortgages and HECMs,” the document said. This figure remains unchanged from the request made in the Trump administration’s final budget proposal submitted last February.
Comparison with previous administration
The Biden administration clearly differs from its predecessors in the HECM-related legislative proposals for the MMI Fund. In the 2021 budget proposal, HUD, led by Secretary Ben Carson, proposed several different legislative remedies for the HECM program.
These included the institution of regional HECM lending limits; a “spousal survival” provision to exempt lenders who would otherwise be required to immediately exclude a living spouse; an update of the actuarial analysis formulated in 2001 that the FHA uses to determine the adequacy of its HECM insurance premiums; the permanent removal of the limitation on the number of HECMs that can be insured by the FHA; and a waiver of the HECM advisory requirement to give HUD the authority to mandate the advisory for all HECM transactions.
In direct contrast, the document accompanying the Biden HUD budget document does not make any legislative proposals for the HECM program within the MMI Fund, even though the new administration attributes the increased costs associated with HECM maintenance to the need for $ 50 million. additional dollars in the Fund Budget.
However, another area of impact on the HECM program is HUD’s Housing Advisory Office, and the Biden administration appears to value the services of this office more than its predecessors in terms of gross dollars requested. In the 2021 document, the Trump HUD requested $ 45 million for housing counseling programs, which was $ 8 million below the level adopted in 2020. In the case of the Biden HUD, the new demand is almost double the last request of the previous administration to $ 85.9 million.
The Biden HUD is also seeking an additional $ 20 million over the Trump HUD for housing counseling agency grants, as well as fraud / scam awareness / prevention and training, requesting $ 61.4 million from the Trump HUD’s request for $ 40.5 million. Current and previous administrations have requested $ 4.5 million for administrative contact services, which includes funding for HECM tools for housing counselors.
A $ 20 million request for a new legal aid grant program, which is designed to prioritize outreach and assistance to qualifying low-income tenants in historically underserved populations facing legal proceedings. The eviction, largely due to housing, comes on top of the Housing Counsel’s Office’s comprehensive request. instability caused by the effects of the pandemic.
Some original relief measures introduced by the Trump administration have been carried over into the Biden administration, including a further extension of foreclosure and eviction moratoria as well as the ability to conduct external assessments only. However, HUD Secretary Marcia Fudge described in a statement where HUD’s priorities under his leadership remain, and how the President’s budget proposal reinforces those priorities.
“With Budget FY22, we are turning the page on decades of divestment and disregard for the housing crisis in our country and putting housing in its place – at the center of our efforts to build a stronger, more equitable America,” HUD Secretary Marcia Fudge said. in a statement accompanying the publication of the budget proposal. “The budget sends a clear signal that HUD will no longer be left on the sidelines as millions of Americans struggle for housing and remain excluded from the opportunities offered by a good home. Budget FY22 transforms and empowers HUD to lay the groundwork for a stronger and more equitable housing infrastructure, to help communities thrive, and to give every person a fair chance to move forward.
NBS action already taken, maintenance issues
While the Trump administration made a legislative proposal last year to address issues with HECM Spouse Non-Borrowing (NBS) scenarios, the Biden HUD has already taken its own steps separate from the legislative process to address this issue.
A few weeks ago, the FHA announced four new primary protections for NBS eligible in a reverse mortgage transaction, including expanding the criteria that begin a deferral period for HECM loans with assigned case numbers as of August 4, 2014, including a scenario in which the primary borrower resides in a health facility for more than 12 consecutive months, but the NBS has remained at home. Separate protections have also been instituted for HECMs with assigned case numbers before as of August 4, 2014, including the new maturity and payment criteria.
The new NBS provisions have been widely welcomed by members of the HECM services industry, including representatives from Celink and Reverse Mortgage Solutions (RMS), as well as the National Reverse Mortgage Lenders Association (NRMLA) based of RMD awareness.
The HECM service by the FHA has long been a controversial issue in debates arising from the health of the reverse mortgage program within the MMI Fund. In an interview earlier this year with RMD, former HUD Assistant Secretary Brian Montgomery described the need to address HECM maintenance issues.
“[I]It’s no mystery that the industry and the FHA still need to work together on many different issues, including reducing the cost of maintaining the assigned wallet, or always looking for ways to improve the disposition process. property, ”Montgomery told RMD in February. “Certainly the industry is interested in the possibility of allowing repairers to keep service at the 98% threshold, and I can certainly understand their perspective on that.”
Earlier this year, NRMLA submitted letters of comment to HUD regarding the HECM service, and HUD also previously revised the single-family mortgage management and loss mitigation policies on both front and back sides of the business. including the codification of new reverse mortgage policies as well as the total or partial cancellation of certain Mortgage Creditor Letters (MLs) that apply to the HECM program.