Reverse Mortgage Jan-Feb 2021

Reports From HUD continued on page 30 Numbers Indicate Trends Here are some numbers that help highlight recent trends in the HECM program. 1. Counseling activity has been increasing during the pandemic, says Joshua Miller, senior policy adviser in HUD’s Office of the Deputy Assistant Secretary for Single-Family Housing. Through the first three quarters of FY 2020, FHA issued 50,489 counseling certificates, compared to 61,258 in all of FY 2018 and 60,082 in FY 2019. 2. When analyzing HECM case number assign- ments by product type—traditional, refinance and HECM for Purchase—the figures stay rel- atively stable from September 2019 through February 2020, when HECM traditional dips from 76 percent to 70 percent in March and then down to 65 percent by June. 3. During the same three quarters ending in June, HECM-to-HECM refis rose from 19 percent to 31 percent. 4. HECMfor Purchase percentages hover between four and five percent of overall volume during the entire September through June period. 5. Since FY 2010, HECM endorsement volume has generally trended downward, from about 80,000 to a little over 30,000 in FY 2019. But based on FY 2020 data through the third quarter, Miller says, that trend appears to be reversing. 6. HECM endorsement by product type has shown a dramatic increase in refinances, up to 17 percent for the first three quarters of FY 2020, compared to about five percent for all of the previous fiscal year. 7. Analyzing by rate type is where Miller shows the greatest variation of the years. In FY 2010, nearly 70 percent of HECMs were fixed rate, and the rest were monthly adjustable. In FY 2014, the monthly type suddenly jumped to nearly 80 percent of total, with the annual adjustable making its first appearance at about two percent. 8. But in FY 2020, the monthly adjustable had disappeared, fixed-rate loans held a tiny por- tion of the total and the rest were annual. Miller attributes this shift to changes in regu- latory policy and securitization, as well as the simple preference of borrowers. “Where we see far greater consistency is in the selection of plan options,” he says. “In the past ten fiscal years, the overwhelming number of borrow- ers have opted for a line of credit (LOC). Term, term/LOC, tenure/LOC and lump sum payment make up the rest.” As for the industry, Irwin adds, it has been able to build its proprietary mortgage portfolio because of the foundation that HUD built around the HECM program. The Mutual Mortgage Insurance Fund Gormley says the FHA efforts, combined with a strong housing market, helped mitigate severe impacts to the Mutual Mortgage Insurance Fund (MMIF). However, changes in the housing market and shifts in the economy could increase potential for future defaults and claims on the fund, he cautions. But he says the strong capital posi- tion in the MMIF built up in recent years should help FHA withstand the current economic stresses from the pandemic. The Fiscal Year 2020 Annual Report to Congress shows that the HECM portion of the MMIF has been REVERSE MORTGAGE / JANUARY-FEBRUARY 2021 29