If Reverse Mortgage Industry Grows, Could Exceed Appropriation

Despite receiving $150 million from the House Appropriators Subcommittee for the HECM program, industry insiders stressed to RMD the appropriations process is a long way from over and there is still lots of work to be done.

There is no doubt that getting $150 million was a good step in the right direction according to Jeff Lewis, Chairman of Generation Mortgage and the leader behind the Coalition for Independent Seniors. “Getting zero would’ve been an extremely difficult situation,” he said in an interview with RMD earlier this week.

But without the full $250 million appropriation requested in the Obama Administration’s FY 2011 budget, the reverse mortgage industry could be limited in the amount of growth it can see and the number of seniors who have access to the program.

According to the Office of Management and Budget, the $250 million subsidy covers 130,000 units with a max claim of $30 billion during fiscal year 2011. However, House appropriators felt $150 million for the HECM program would be sufficient to cover the expected volume during the next fiscal year. Industry analysts estimate the $150 million would cover roughly 69,000 units, less than what is anticipated for FY 2010.

Data from the US Department of Housing and Urban Development shows 60,603 HECMs have been endorsed during fiscal year to date. Conservative estimates for the remaining three months put year end endorsements at just over 75,000 units and more than the House appropriation would cover.

“If the industry grows, we have a big problem with using up the appropriation,” said Lewis. By endorsing more units than appropriators estimates, HUD could be forced to shut the program down for the remainder of the fiscal year unless it receives additional help from Congress.

“We cannot exceed the appropriation,” said a spokesperson from HUD in an email to RMD. “We closely monitor the volume and if for some reason the $150 million appeared to be insufficient—we would notify Congress in advance and would likely get a supplemental to keep it open.”

Last week at it’s “road show” in Irvine, CA, Peter Bell, President of the National Reverse Mortgage Lenders Association stressed to attendees the organization is “trying to get as much as we can possibly get.”  He added, getting $250 million for the HECM program “is a pretty tall order in this tight fiscal environment.”

There is a chance the new HECM Saver program could offset the difference in the appropriation as well according to Bell.  However, it’s not something the industry is counting on and is the reason it continues to tell its story to politicians in Washington.

After spending last week in DC, Lewis said, “we’re building momentum, connecting with more senators and congressman and they’re becoming more enthusiastic about what we’re doing for seniors.” This connection isn’t something the industry had before and the fact that they’re realizing it is “very important to the industry,” he said.

The bill heads to the full House Appropriations committee on Tuesday and the Senate appropriations subcommittee is expected to introduce the bill soon.

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