Trump asks HUD to address financial viability of reverse mortgage program

Housing finance reform to include assessment of HECMs

On Wednesday, President Donald Trump signed a memorandum to put into motion federal action on the “overdue reform of the housing finance system.”

In it, Trump officially called for the end of the conservatorship of Fannie Mae and Freddie Mac and for the improvement of the regulatory oversight of both agencies.

The presidential directive tasks the Department of Housing and Urban Development and the Treasury Department with drafting proposals for reform, with the Treasury detailing Fannie and Freddie plans while HUD lays out a plan for the housing finance agencies it oversees.

Among the president’s to-do list for the HUD secretary: address the financial viability of the Home Equity Conversion Mortgage program.

In November, Federal Housing Administration released its 2018 Report to Congress, which revealed that the reverse mortgage program continues to be a drain on its flagship Mutual Mortgage Insurance Fund.

The HECM program was shown to have a negative capital ratio of 18.83% and a negative economic net worth of $13.63 billion in the last fiscal year.

But despite the drain, FHA Commissioner Brian Montgomery said the agency would not be issuing further reverse mortgage program changes just yet, keeping current principal limit factors and mortgage insurance premiums intact as it waits to see the true impact of policy changes made in 2017.

But it looks like the agency may now be forced to act.

Trump’s memorandum directs HUD Secretary Ben Carson and his team to develop a legislative reform plan that achieves the agency’s objective to maintain the financial soundness of the reverse mortgage program.

It states that HUD must specify whether the proposed reform requires congressional action or just administrative reform, with the later requiring a timeline for implementation.

Trump requested that HUD consult with other government agencies in developing its plan, including the director of the Office of Management and Budget and the director of the Consumer Financial Protection Bureau.

The reform plan is to be submitted to Trump for approval as soon as possible.

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