Jan-Feb2020

$5.92 billion at the end of this past fiscal year,” FHA Commissioner Brian Montgomery remarked in the annual report. “This clearly shows the progress we have made toward stabilizing the HECM portfolio’s financial drain on the MMI Fund.” Montgomery made similar remarks Nov. 18 as the keynote speaker during NRMLA’s 2019 Annual Meeting in Nashville. Montgomery said he looks forward to working with NRMLA and the reverse mortgage industry to address these issues and reiterated his support for HECM as a valuable program to help seniors age in place. Factoring in FHA’s forward mortgage portfolio, the MMI Fund Capital Ratio was 4.84 percent, the highest level since 2007 when it reached seven percent, and the fifth consecutive year this ratio exceeded the statutory minimum of two percent. Montgomery attributed the improved economic strength of the MMI Fund and HECM portfolio to the health of the economy and housing market, as well as HECM policy changes made in 2018 and 2019. Academics Offer Solutions for Improving Reverse Mortgage Appeal The Brookings Institution, in partnership with the Kellogg School of Management at Northwestern University, hosted a public forum in Washington, DC, on Oct. 28 that featured two prominent reverse mortgage researchers who shared new ideas for making reverse mortgages more appealing to consumers and less risky for the federal government. Headlined as “Reverse Mortgages: Promise, Problems and Proposals for a Better Market,” the event was the third of its kind organized this year by Brookings and the Kellogg School to raise awareness about retirement security issues. Stephanie Moulton of The Ohio State University and Thomas Davidoff of the University of British Columbia presented two white papers that offered solutions for making reverse mortgages more appealing, while addressing crossover risk and losses to the Federal Housing Administration. Moulton, whose paper was co-authored by Ohio State economics professor Donald Haurin, proposed two new product options: a small-dollar reverse mortgage for people who need access to short-term liquidity; and a streamlined forward-to-reverse mortgage that targets homeowners who still have mortgages and could benefit from eliminating their monthly mortgage payments. She also described how risk-based underwriting and preventative servicing can reduce the probability of tax and insurance defaults and crossover risk. The second white paper by Davidoff theorized that reverse mortgages can be made more attractive to borrowers and lenders by increasing loan amounts at origination to purchase a life annuity. The annuity, says Davidoff, can be used to pay down principal and interest on the loan while borrowers remain in their homes. This can serve to transfer loan balances from long after origination—when the home is likely to be worth less than the outstanding balance—to earlier dates when the home is more likely to be worth more than the borrowers owe. Following their presentations, Northwestern University’s Benjamin Harris moderated a discussion with Moulton and Davidoff, along with Columbia University Professor and Longbridge Financial CEO Chris Mayer and Laurie Goodman of the Urban Institute, to discuss these ideas. A video of the proceedings can be found at brookings.edu . Housing Secretary Promotes Reforms to Improve HECM Solvency Testifying before the House Committee on Financial Services on Oct. 22, HUD Secretary Dr. Ben Carson said financial volatility within the HECM program remains a constant challenge, but his agency has proposed several key reforms to “ensure the product remains a viable option for America’s seniors who desire to ‘age in place.’” Carson appeared alongside Secretary of the Treasury Steven Mnuchin and Federal Housing Finance Agency Director Dr. Mark Calabria. Much of the three-and-a-half-hour hear- ing focused on President Donald Trump’s 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 the performance of the HECM program remains a key concern “despite changes to the program’s principal limit factors and insurance premiums in 2017, and the implementation of an appraisal inflation risk mitigation policy in 2018, The Biz continued on page 10 Dr. Ben Carson REVERSE MORTGAGE / JANUARY-FEBRUARY 2020 9