HUD budget shows HECM program is regaining momentum

by MPA10 Feb 2015
U.S. President Barack Obama’s proposed budget for the Federal Housing Administration (FHA) in 2016 revealed that the administration is starting to see reverse mortgages as viable again.

The administration is projecting the HECM portion of FHA’s Mutual Mortgage Insurance Fund will generate positive cash flow in the coming fiscal year; up slightly from a negative subsidy rate of -0.4% projected for fiscal year 2015.

“During the housing crises, seniors were significantly impacted by the recession and falling home prices and, as with Forward Mortgages, risk to the MMI Fund increased,” HUD wrote in its budget proposal. “Since the passage of the Reverse Mortgage Stabilization Act in 2013, FHA has implemented several changes to strengthen and enhance the HECM program.”

Other changes include limiting upfront draws, mortgage insurance premium structure changes to encourage lower initial draws, a shift to Adjustable Rate HECMs and the upcoming financial assessment that will take effect March 2.

The FY2016 budget proposal also includes a bump in HUD’s current funding levels. The agency is requesting an increase of nearly $4 billion to $49.3 billion.

“HUD is the Department of Opportunity and the President’s budget proposal is a blueprint for greater opportunity for all Americans,” Secretary Julián Castro said. “By increasing our department’s funding level by nearly $4 billion over current levels, the President’s budget helps us continue our progress toward achieving our mission to promote homeownership, support community development—including making neighborhoods more resilient to natural disasters—and expand access to affordable housing for all.”

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