The White House this week submitted its fiscal year 2025 budget proposal to the House of Representatives and the Senate, outlining the priorities of the administration in providing a budgetary blueprint for the entirety of the U.S. federal government.
Within the congressional justifications for the U.S. Department of Housing and Urban Development (HUD) are a few key priorities related to the Federal Housing Administration (FHA) and its Home Equity Conversion Mortgage (HECM) program. These include a series of legislative recommendations that would require congressional support to implement.
The president’s budget is only a proposal, the beginning of conversations among lawmakers about what priorities to fund and at what levels. A president’s budget proposal is rarely implemented as proposed, but it can provide insight into the kinds of conversations that government officials, lawmakers and other stakeholders may pursue.
HECM counseling, MMI Fund
The first major HECM provision of the proposed HUD budget relates to counseling, where the department explains that its roster of certified HECM counselors currently stands at 367.
HUD is requesting $2.5 million to fund a training grant that would, in part, “enable specialized training that will prepare counselors to support expanded HECM counseling and to better understand property valuation bias so that they can effectively counsel clients on this topic,” according to congressional justifications for the budget.
The budget also requests $400 billion in loan guarantee commitment limitation for the Mutual Mortgage Insurance (MMI) Fund through September 2026, which is “sufficient authority for insurance of all single family forward mortgages and HECMs,” the document reads.
“Total loan volume projected for all MMI programs for 2025 is $237.9 billion. Of that total, $220 billion is estimated for standard forward mortgages and $17.9 billion is for HECM.”
Legislative proposals
There are several legislative proposals outlined for the HECM program. The first is to facilitate housing counseling for refinance transactions. Under current law, “prospective borrowers must receive HUD-approved housing counseling to qualify for a HECM, except a borrower can waive this requirement for a refinance if less than five years has passed since the closing date of their current HECM.”
HUD is seeking to remove the borrower’s ability to waive the counseling requirement for a HECM refinance if the loan was obtained in the last past years. The department said that this would give HUD “the ability to require the borrower obtain counseling to ensure borrowers understand the financial transaction they are entering into by refinancing their HECM.”
The second legislative proposal is one that has been floated in years past. It would remove the cap on the number of HECM loans that can be insured by FHA. This has consistently appeared on HUD’s list of HECM proposals for several years, but Congress has yet to agree to any such measure.
Third, HUD seeks to update the actuarial analysis used to set mortgage insurance premiums on HECMs, since HUD in 2003 satisfied a statutory requirement that it would “conduct an actuarial analysis to determine the adequacy of its HECM insurance premiums with respect to lower upfront premiums for refinances and a single national loan limit, and the combined effects of those two policies.”
This makes the current language “unnecessary,” HUD argues. The proposal would also make “a conforming change to HUD’s authority to collect a lower upfront mortgage insurance premium for a refinanced HECM.”
Lastly, HUD is seeking to change mandated notices of foreclosure to include outreach methods beyond only traditional mail within the HECM program.
“The requested change would modify the existing notice requirements by adding alternative options when all HECM mortgagors are deceased,” the document stated.
HUD also proposes a slight change to HECM policy related to non-borrowing spouses. It seeks a change that would clarify “that automatic protections apply only to non-borrowing spouses identified at origination, consistent with current policy, while also establishing flexibility to extend further protections at the Secretary’s discretion.”
Regional loan limits
Making a return to the legislative proposals for the HECM program this year is the concept of a regional loan limit, although under a slightly different methodology. Instead of instituting and requiring regional lending limits, HUD would instead implement regional limits “aligned to the limits currently in place for the single family forward program,” but it would not require them.
Members of the reverse mortgage industry, including the National Reverse Mortgage Lenders Association (NRMLA), have long argued that regional loan limits for the HECM program are not appropriate. The industry successfully lobbied for a national loan limit for the HECM program in the mid-2000s.
“It is important to note that the single-national loan limit for HECM (as opposed to the area-by-area limits) is something that exists because of NRMLA’s advocacy efforts,” NRMLA President Steve Irwin said in 2021. “NRMLA successfully persuaded Congress, and key HUD officials, that the area limits used for forward mortgages did not really make sense for HECMs.”
The fundamentally different guiding principles of the HECM program make a single national limit more appropriate, Irwin said.
“The costs of aging, prescription drugs, durable medical equipment, adapting a home with stair glides, etc., do not differ regionally,” Irwin said. “So a homeowner with a higher value property in an area with a low FHA loan limit should not be penalized by only being able to borrow based on [their area’s] forward mortgage loan limit.”
