The Home Equity Conversion Mortgage (HECM) program remains a core part of the Joe Biden administration’s stated housing mission, and is a tool that can assist Secretary of the Department of Housing and Urban Development (HUD) goals. Marcia Fudge and the President. Biden by ensuring that the elderly have the capacity to age in their own place.

This was the central idea expressed during a keynote address at the National Reverse Mortgage Lenders Association (NRMLA) virtual annual meeting on Tuesday by Lopa P. Kolluri, Senior Assistant Deputy Secretary (PDAS) for the Office of Housing and the Federal Housing Administration (FHA). Kolluri, who previously addressed the reverse mortgage industry trade association at a previous event earlier this year, describes the leadership’s momentum of the HECM program and the federal government’s commitment to stay engaged with the industry and its stakeholders.

This is especially true after the creation of a consolidated section of the HECM program in the Single Family Housing Handbook 4000.1, she said. Kolluri also indicated that the health of HECM’s business volume within the MMI Fund may have improved, although she declined to go into details since the FHA’s annual report to Congress is not still final.

The Administration’s Reverse Mortgage Perspective

Echoing the sentiments of former FHA officials who have approached NRMLA in the past, Kolluri explained that the main concern of HUD and FHA with the HECM program is to ensure that it remains “viable. As a tool for the elderly. However, Kolluri also explained that there are some key initiatives led by the Biden-Harris HUD that have enabled the HECM program to benefit, she explained.

“When I spoke with NRMLA in April, I mentioned that we shouldn’t wait until the future is upon us before taking action. Seven months later, I am proud to speak to you as a member of the administration that has moved from talk to deed at record speed, ”said Kolluri. “And that includes our work with all of you on the [HECM] program.”

Kolluri also hinted at the role the HECM program can play in terms of the broader White House housing goals, linking the core mission of the HECM program and the reverse mortgage industry to the stated political priorities of President Biden and the secretary Fudge.

“Let me say right away that the HECM program remains an important part of HUD’s solutions to increase housing stability for seniors,” she said. “As President Biden and Secretary Fudge have made it clear: Ensuring that seniors have access to safe and affordable housing in which they can age at home is a key priority for this administration.”

Kolluri praised the work of NRMLA and the industry in working with the ministry to support the “hundreds of thousands of seniors” currently using an HECM loan, but also indicated that the program must remain evolving in order to be continuously available for seniors who may benefit from it.

“The HECM program must continue to evolve to keep it viable for everyone,” she said. “As we have seen in the past, changes such as adding collateral risk assessment and associated requirements for second assessments to support collateral assessments can make a measurable difference in the financial performance of the program. The stable financial performance of the HECM portfolio allows us to take faster action on how we manage the political and operational components of this program. “

Manual consolidation, HECM modification proposals and LIBOR transition

Highlighting this development, Kolluri cited the recent set of HECM Consolidated Program Requirements that were posted on the HUD Single Family Editorial Board in late September, the review period of which was also extended from mid-November to by the end of December 2021. The majority of the section to be reviewed is currently a consolidation of disparate guidelines in a more easily accessible location, some changes to the HECM program have been introduced, Kolluri said.

“In the project, we offered advice on extended employment breaks in order to provide lenders with the steps they need to take for a borrower returning to work after being retired for a long time,” explained Kolluri. “We are also proposing a policy that codifies our guidelines for HECM borrowers in major disaster areas declared by the President so that we are clearly aware that HECM borrowers are protected in a manner similar to term mortgages insured by the FHA.” . And there are others.”

Industry feedback on the new HECM section of the manual will be critical to the implementation of these guidelines, and Kolluri expressed hope that as many industry participants as possible will review the documents as they appear. are published. Kolluri also drew attention to the looming transition of the London Interbank Offered Rate (LIBOR) Index for HECM Variable Rate Mortgages (ARMs), outlining a further need for the industry to share comments on the HECM’s proposals. ministry in this area as well.

“We published an advance notice of regulatory proposal in the Federal Register on October 5 and public comments are expected on December 6,” Kolluri said of LIBOR’s transition to the guaranteed overnight funding rate ( SOFR). “I can’t tell you in strong enough terms how important it is for NRMLA members to contribute their comments, and I know you will. There will be a difficult transition for your existing HECM ARM service portfolios. As an industry, we need to get it right, and we’re counting on you to help us navigate the complexities and considerations.

Technology updates, COVID-19 response

While recent work to integrate HECM functionality into the FHA’s Catalyst software platform has enabled a constant effort by the FHA and HUD to modernize some reverse mortgage processes, there is still a long way to go. in terms of technological integration, Kolluri said.

“While far from a total solution, we have modified our new FHA Catalyst assessment submission technology to accept HECM assessments, with a full transition required by April 15, 2022,” she explained. . “It’s a small change certainly, but it’s the first tangible presence of HECM origin on the new platform, and it’s an important first step.”

Kolluri also gave additional updates on the FHA’s response to the ongoing COVID-19 pandemic and how the agency’s actions interact with the HECM program and the industry around it, highlighting waivers issued on September 2, which allow borrowers to review for subsequent repayment plans for unpaid property charges, regardless of the total unpaid sums that have not yet been paid (arrears). One also allows mortgage creditors to apply for the assignment of an HECM loan to HUD immediately after using their own funds to pay unpaid property taxes and insurance from March 1, 2020.

Industry, MMI Health Fund

Although the FHA is not yet ready to offer specific numbers related to the health of HECM’s portfolio of activities within the Mutual Mortgage Insurance Fund (MMI) as the agency’s annual report to Congress is still pending. During finalization, she indicated that a “spring and summer of action” led to totals for the best fiscal year 2020, according to agency data.

“We are now focused on finalizing our annual report to Congress on the MMI Fund which we hope to have in a few weeks,” she said. “I can’t talk about specific results because quite frankly we always check the numbers. What I can say is that despite the constraints and the pandemic, the HECM program served nearly 45,000 seniors in the fiscal year up to August, already surpassing the total approval volume over the past year. for fiscal year 2020. “

The year was marked by a strong appreciation in house prices, a fact which “bodes well” for the HECM portfolio in the short term. This may not tell the full story, however.

“As we all know, the financial performance projections of the HECM portfolio are significantly more sensitive to changes in house price appreciation and interest rates,” she said. “I know you look forward to seeing the results of the exercise and the HECM portfolio when they are released. We know we have more challenges, but also more opportunities to work with you and with you to meet those challenges, but with your support and willingness to work more closely with us, we can keep our momentum going.