Edward L. Golding, Principal Deputy Assistant Secretary for the Office of Housing at HUD, testified before Congress that extensive reforms to the HECM program over the past two years have had the desired effect of minimizing losses to the Mutual Mortgage Insurance Fund.
Beginning in 2013, FHA limited the amount of proceeds that borrowers could access at closing, changed the MIP structure to support lower draws at closing, and limited fixed rate loans to one lump sum draw at closing.
“Now, with the benefit of two years of data, FHA can see that these changes appear to be having positive results,” Golding informed lawmakers on the Subcommittee on Housing and Insurance during a public hearing held on February 11th on the health of FHA.
As a result of these changes, less risky adjustable rate loans accounted for 84% of HECM endorsements in 2015, more people are withdrawing less money at closing, and borrowers are not making large withdraws after the first 12 months but are instead preserving their equity for future use.
Despite the good news, Golding cautioned that “challenges in ensuring seniors will be successful with HECMs remain and HUD continues to further examine how to reduce the negative effects of tax and insurance defaults which can lead to foreclosure for seniors.”