As the mortgage industry prepares to bid farewell to a tumultuous 2024, good news for Federal Housing Administration The (FHA) Home Equity Conversion Mortgage (HECM) program — which underpins most of the nation’s reverse mortgages — helps give a sense of the program’s overall health despite the business challenges it endured this year.
Steve Irwin, president of National Reverse Mortgage Lenders Association (NRMLA), sat down in a recent interview with HousingWireReverse Mortgage Daily (RMD). Irwin discussed one of the organization’s perspectives on the industry and the status of FHA’s Mutual Mortgage Insurance (MMI) Fund.
FHA annual report, HECM program
Irwin responded positively to the news regarding this year’s HECM business book within the MMI Fund, which continues to operate above legal requirements.
The HECM program recorded a positive rate of return for the fourth year in a row across all government-backed portfolios. Good levels of home price appreciation were cited as the main reason for the 7.78% increase in the average HECM loan compared to last year.
But Irwin also lauds the changes made to the HECM system over the past few years as important elements of business sustainability, despite the challenges they may pose to some industry stakeholders and NRMLA members.
“Of course, the first reaction is that I – and our board – remain very pleased that the HECM program continues its strong performance,” Irwin said. “It just goes to show that the tweaks and changes made over time continue to strengthen the system’s stability.”
Some of that performance is due to home price appreciation. But Irwin also notes that this metric has recently been measured, further emphasizing the credit he says should be given to the HECM program’s sometimes disruptive changes.
“[The strong performance] due to financial audits, joint risk assessments, secondary assessments – all areas that have frustrated our members and continue to cause some frustration,” said Irwin. “That doesn’t mean we won’t look at ways to improve those parts of the program, but they strengthen stability. It’s important to understand that those changes were important how much.”
Criticism of major program changes
When asked if criticism of the changes — especially the second test — from industry experts has been moderated in the years since they were first offered, Irwin said the issues are still being discussed. But he added that there are ways to encourage the development of any controversial policies.
“When there’s a change or something new, there’s usually some initial frustration,” Irwin said. “Financial audits, for example [served as] A huge sea change in the way loans were originated and the way the whole process worked. But now, that’s just the way things are done. Can we advocate for tweaks in that process? Absolutely – and we will continue to do so. “
The same attitude applies to the collateral risk assessment process, which can sometimes lead to the need for a second property assessment. Irwin said he strongly believes there are ways to determine value, but the nature of the HECM program as a no-fee program requires that the valuation be accurate. Some of this extends to the private label reverse mortgage market.
“But are there ways to streamline the process, or save costs or improve efficiency that we can advocate for? Definitely,” he said. “It doesn’t have to be a complete second test. There are technologies and data sets available that can validate home values, and I believe we should continue to explore those options.”
But the program remains sensitive to home price appreciation, and industry participants and NRMLA members should not forget that independent evaluations of the HECM program itself “continue to show soundness,” he said. The agency continues to review areas that the FHA report indicates should be reviewed further through 2025 and beyond.
Look for more from Steve Irwin on HousingWire’s RMD soon.
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