Less than a week after the Trump Administration released its proposed Housing Finance Reform Plan, the chief architects behind the proposals – Treasury Secretary Steve Mnuchin, Housing Secretary Ben Carson, M.D. and Federal Housing Finance Agency Director Mark Calabria PhD – were on Capitol Hill addressing questions and concerns before the Senate Banking Committee.
Much of the two-hour hearing focused on the administration’s plan to end the conservatorship of Fannie Mae and Freddie Mac and Democrats’ assertions that the reform plan would drive up costs for consumers. Reverse mortgages were not explicitly discussed, but Secretary Carson noted in his written testimony that “to continue shoring up the HECM program and best ensure these mortgage products remain a viable option for America’s seniors that desire to ‘age in place,’ HUD has proposed several key reforms.” He continued:
- “First, HUD recommends Congress reform the loan limit structure in the HECM program to reflect variation in local housing markets and regional economies across the U.S. instead of the current national loan limit set to the level of high-cost markets in the forward program ($726,525 for calendar year 2019).
- Second, HUD proposes Congress set a separate HECM capital reserve ratio and remove HECMs as obligations to the MMIF (Mutual Mortgage Insurance Fund)—reforms that would provide for a more transparent accounting of the program costs and decrease the cross-subsidization that occurs with mission borrowers in the forward mortgage portfolio; and
- Third, HUD proposes FHA eliminate HECM-to-HECM refinances as these loan transactions result in greater appraisal inflation, increasing program costs, and negatively impacting GNMA guaranteed HECM MBS (HMBS) due to quick ‘churn’ in pool participations.”
Watch the hearing at https://www.banking.senate.gov/hearings/housing-finance-reform-next-steps
NRMLA will be discussing these proposals with its Board of Directors when they meet in Washington, DC next week.