HOUSINGNEWS REPORT
REVERSE MORTGAGES: CAN FINANCING FOR SENIORS CHANGE WITH THE TIMES?
SHARE OF FHA REVERSE MORTGAGE WITH APPRAISALS EXCEEDING AVM BY 10% OR MORE
is that a reduction in forward MIP costs will remain unlikely.
>=10%
>=20%
>=30%
• The new two-appraisal requirement is beginning to impact HECM underwriting. About one- fifth (22 percent) of all new HECM applications since Oct. 1st have required a second appraisal. • Figures from Reverse Market Insight show that 2,553 HECMs were endorsed by HUD in November, down from the 6,308 HECMs insured in January Can HUD make additional changes that both protect the program and make it more enticing to consumers? MyHECM’s Mike Roberts says there is a strategy that could work. “In fiscal year 2010, adjustable- rate HECMs were just 35 percent of endorsements,” said Roberts. “In fiscal year 2018, they were nearly 90 percent of endorsements. Rates have already risen substantially this year. As they continue to rise, adjustable- rate HECM balances will grow faster. On top of that, we’re now seeing signs that rising rates are impacting home values. The Mutual Mortgage Insurance Fund (MMIF) could soon face the double whammy of rapidly growing loan balances and declining home values.” Roberts says that “a fixed-rate HECM with the flexibility and higher PLs of the adjustable-rate HECM could be a way to help limit future rate risk to the HECM program. It would also be very appealing to consumers.”
40% 35% 30% 25% 20% 15% 10%
5% 0%
2016
2017
2018
COHORT YEAR
SOURCE: U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
insurance premium we instated in 2017 were designed to help, but did not — and were not intended to — and will not fully solve the financial volatility of the program.” And yet in a short period such changes have had a substantial impact. With HUD’s new requirements the HECM program is plainly evolving. • In FY 2018 a total of 48,327 HECMs were insured, the smallest number since FY 2005.
• In FY 2018 the HECM portfolio had a negative net worth of $13.63 billion, an amount $870 million lower than the $14.5 billion negative net worth reported for FY 2017. If the HECM negative net worth continues to fall and forward net worth continues to be such a success it may be possible to simply carry the HECM program. Whether that will be politically feasible or financially acceptable over time is unknown. One by- product of the current situation
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DEC 2018 | ATTOM DATA SOLUTIONS
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