On Thursday, Vice President Kamala Harris will formally accept the Democratic Party’s nomination for president in this fall’s general election. In July, former President Donald Trump accepted the Republican nomination for the third time, and both candidates will square off in a campaign that is sure to focus on major hot-button issues heading into November.
The Federal Housing Administration (FHA)-sponsored Home Equity Conversion Mortgage (HECM) program is not one of these hot-button issues, but has a lot of interactions with the political process due to its nature as something of a public-private partnership.
As we inch closer to the general election on Nov. 5, HousingWire’s Reverse Mortgage Daily (RMD) is taking a closer look at both candidates’ perspectives and interactions with reverse mortgages.
Donald Trump and reverse mortgages
Former President Trump’s four-year term from 2017 to 2021 brought a number of developments to the HECM program. Some of these proved consequential under the stewardship of HUD Secretary Ben Carson and FHA Commissioner-turned-deputy HUD secretary Brian Montgomery.
While the Obama administration managed to eke out a final rule for HECMs the day before Trump was inaugurated in 2017, which ultimately went into effect that September, the most immediate policy impact the Trump administration had on the HECM program came when Carson announced that the department planned to increase premiums and tighten lending limits on reverse mortgages. This was tied to concerns regarding the strength of the program and taxpayer losses to the Mutual Mortgage Insurance (MMI) Fund.
“Given the losses we’re seeing in the program, we have a responsibility to make changes that balance our mission with our responsibility to protect taxpayers,” Carson said in a statement emailed to RMD at the time. “Fairness dictates that future HECM loans do not adversely impact the overall health of FHA’s insurance fund, which supports the financing needs of younger, mostly first-time homeowners with traditional FHA mortgages.”
The impact of these changes, which went into effect on Oct. 2, 2017, remain polarizing among reverse mortgage industry professionals. The following year, HUD introduced a collateral risk assessment, which sometimes results in the requirement of a second property appraisal.
These changes led to a noticeable atrophy of the reverse mortgage industry, although Trump administration officials consistently maintained through the end of their term that the changes had their intended effects on the health of the HECM program.
“While recognizing that the HECM stand-alone capital ratio is highly sensitive to [home price appreciation], even more so than the forward book, the changes made to the reverse program in 2017 and 2018, and changes made by previous administrations, nevertheless have helped move a program that had been struggling to demonstrate sustainability in a positive direction and into the black,” Montgomery and his consultancy partners wrote for RMD in 2021.
The Trump administration also proposed further HECM reforms later in the term, including some — the development of new HECM servicing standards and the elimination of HECM-to-HECM refinancing — that did not require congressional approval.
One legislative proposal would have revised the loan limit structure in the HECM program to reflect variation in local housing markets, but these 2019 proposals were effectively drowned out by the need to respond to the COVID-19 pandemic early in 2020.
That March, Trump directed the suspension of all foreclosures and evictions in an order extended multiple times and which included the HECM program. FHA relaxed appraisal requirements while HUD delayed HECM due-and-payable requests.
The pandemic would end up dominating the administration’s attention on the housing front for the remainder of Trump’s before it expired on Jan. 20, 2021.
Kamala Harris and reverse mortgages
Prior to becoming vice president, Harris’ interactions with the reverse mortgage industry came primarily from her time as a prosecutor — specifically during her time serving as a district attorney and later as California’s state attorney general.
In 2009, then-San Francisco District Attorney Harris indicted former reverse mortgage broker John McTaggart for the alleged theft of $140,000 in reverse mortgage proceeds from an 86-year-old borrower as part of an annuity scam. McTaggart allegedly sent regular monthly checks to the victim to mask his activity. In early 2010, Harris successfully prosecuted McTaggart, which resulted in a six-year prison sentence.
As California’s attorney general, Harris allied with her counterpart in Nevada for a joint investigation designed to assist homeowners harmed by misconduct and fraud in the aftermath of the 2008 financial crisis. In 2016, Harris also supported legislation that sought to protect widowed spouses and other heirs from mortgage foreclosures.
Harris was elected to the U.S. Senate in 2016 and ran for the 2020 Democratic nomination for president before ultimately being announced as Joe Biden’s running mate that August. As vice president, Harris has not had any notable interactions with the HECM program during her term, but she has served multiple times as a point person for HUD on other administration priorities in housing.
Earlier this year, Harris announced a HUD program for housing and community development grants totaling $5.5 billion. About a month before Biden endorsed her as president, she announced an additional series of grants designed to boost homeownership by addressing issues of supply and affordability.
Harris has also laid out other housing proposals in her presidential campaign that are primarily focused on supply, affordability and down payment assistance. Should she win in November, it remains to be seen whether there will be substantive holdovers from the Biden-Harris administration’s appointees at HUD, FHA, and other entities like the Federal Housing Finance Agency (FHFA) and Ginnie Mae.
As of now, the Biden administration’s biggest reverse mortgage task of the moment is the implementation of a new HECM-backed Securities (HMBS) program from Ginnie Mae, which stems from liquidity challenges caused by the collapse of a major lender at the end of 2022. The election makes the ultimate outcome of this pursuit unclear at the moment.
