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The reverse mortgage industry has had an eventful year, and the National Reverse Mortgage Lenders Association (NRMLA) stands ready for yet another year of change according to Steve Irwin, its president. With political changes on the horizon, debate about some core Home Equity Conversion Mortgage (HECM) program attributes and work to be done, Irwin sat down with HousingWire’s Reverse Mortgage Daily (RMD) to discuss these and other major industry topics.
Change is something of a constant in the world of politics, and because the HECM program represents a public/private partnership, there will be new stewards of the program stepping into their roles in the next month. We talk about this, recent changes to the HECM limit for 2025 and more in this part of RMD’s interview.
Political change is coming, but housing is bipartisan
“There is a change in administration, and a change in control of the House of Representatives and the Senate coming,” he said. “But as I’ve said before, housing issues run deep, and they cut across party lines. We know that part of the Republican Party’s published platform is a desire to support policies that help seniors remain in their home and maintain financial security.”
A reason Irwin is optimistic about what that could mean for the HECM program is because that also fits its broader goals in serving older Americans, he explained.
“For the right individuals at the right time and under the right circumstances, that is the FHA-insured HECM program,” he said. “NRMLA has always remained close and developed relationships on Capitol Hill on both sides of the aisle, and we will continue to do so with this change.”
One particular change that Irwin is watching is the change in leadership on the Senate Banking Committee, and the association will seek to strengthen key relationships. In fact, that work has already begun, he said.
“I’ve already had two meetings on Capitol Hill on the HECM program,” he said. “With those meetings, I’m intending to ensure continued support for this critically important program, and it’s by all accounts there.”
The 2025 HECM limit
In November, the Federal Housing Administration (FHA) announced that the HECM limit for 2025 would rise to more than $1.2 million, and some industry professionals have debated the utility of a limit rising that high. But Irwin says that recognizing increases in home-price appreciation and the adjustments that brings to government lending programs should naturally include the HECM.
“We’ve been talking about home-price appreciation and its contribution to the soundness of this program,” he said. “It’s a fact that appreciation remains positive. It may be moderating, but people’s home values are increasing, and it just makes sense that those older homeowners on the higher end of the value spectrum should be able to [access that equity]. You know that this limit — which is really a claim amount, but becomes a lending limit — it just makes sense to me that It would increase again.”
How much further it can go up is hard to say, because at that point it becomes a risk evaluation for HUD and FHA, he said.
“But I am glad to see that as people’s homes appreciate, that they’ll be able to take advantage of that much more of their home value as they’re evaluated for qualification of the loan.”
Potential HECM program changes
Political changes could also come with new priorities for managing the HECM program. At the end of the first Trump administration, for instance, the administration floated the idea of reinstituting regional lending limits for HECM as well as eliminating HECM-to-HECM refinance transactions.
Regional lending limits seem to come up often as a discussed HECM program reform, despite the fact that NRMLA has long argued that regional loan limits for the HECM program are not appropriate. Both the first Trump and Biden administrations sought to propose reinstituting them. The industry, with NRMLA playing a leading role, successfully lobbied for a national loan limit for the HECM program in the mid-2000s.
Irwin reiterated NRMLA’s opposition to such a plan.
“Regional loan limits for the HECM program is something we will absolutely oppose,” he said, should the proposal re-emerge in a second Trump administration. “The cost of durable goods and home repair or modification so that an older homeowner might effectively age in place is the same wherever you live.”
Regional limits, Irwin argues, is a forward mortgage concept “because of different higher-priced areas around the country,” he said. “A senior living on fixed income faces expenses that don’t adjust regionally, and there’s no reason for a regional loan limit for this program. I don’t see it going anywhere, but absolutely we would have to oppose that and educate lawmakers about why we maintain our position.”
If the Trump administration revives a proposal to eliminate HECM-to-HECM refis, Irwin said that is also something the association couldn’t support.
“Why should any administration oppose the choice of a consumer to take advantage of additional equity that might be available, or lower interest rates?” Irwin asked rhetorically. “That limits borrowing power, and I don’t know if that’s doable. That being said, I do think that there are opportunities to re-examine the initial mortgage insurance premium (MIP) structure on refinance activity, absolutely, and I look forward to having those conversations with HUD.”
The only real costs to the HECM portion of the MMIF are losses and loss reimbursements. all other costs, including compensation, employee benefits, costs of facilities, and similar operating and general and administrative costs, are paid from the budget (i.e., U.S. taxpayers). If there is an across the board cut to the entire budget of say 5% to 10%, this could result in HUD being forced to limit the number of HECMs being endorsement to an amount lower than last year (approximately 26,500 were endorsed last fiscal year depending on source within HUD and the date that data was given). There is Little that NRMLA could do in such a case.
In Project 2025, Dr. Ben Carson, the former Secretary of HUD (in the first Trump term) laid out some of his vision for the HECM program and since his mentee is the nominee for HUD Secretary, it is worthwhile to look to see what Dr. Carson says about reducing HECM risk. One reduction that Dr. Carson made while HUD Secretary that most of us are familiar with are the 10/2/2017 changes. Despite not making much sense for a program with a 24.5% reserve when the minimum required is just 2%, we could once again see a reduction to PLFs and even increases in MIP.
In project 2025, Dr. Carson also recommends that the HECM program be moved into its own special risk insurance fund. Yet he fails to say if the entire HECM portion of the MMIF should be moved into the new fund or not. It would be horrific if either the new fund is less transparent or the entire HECM portion of the MMIF is not moved into this proposed new fund since that portion of the MMIF is almost $16 billion positive per HUD.
As to HECM refinancing, no HECM borrower should be locked into a HECM without any hope of refinancing with another HECM when facts and circumstances change so that refinancing would help the borrower or the borrower’s spouse. Yet it is also important that steps be taken to further limit refinancing in order to avoid further problems with HMBS investors so that negative changes are made to HMBSs. The rise in HECM refinancing in fiscal years 2021 and 2022 was not only irrational but also unreasonable. Those two years had far more HECM refinancing than the three fiscal years with the greatest endorsement volume, 2007-2009, the only fiscal years with over 107,500 HECM endorsements each (the closet year to those three, fiscal 2010 with about 79,100 HECMs endorsed).
Refinancing in fiscal year 2021 was almost 20,600 endorsements which was 42% of the total HECMs endorsed in that fiscal year and almost 29,0000 in fiscal year 2022 representing almost 45% of the total HECMs endorsed in that fiscal year. With almost 114,700 total HECMs endorsed in fiscal year 2009 was the highest such total ever but the number of HECMs refinanced were just under 9,000 which was less than 8% of the total HECMs endorsed during that fiscal year. Since fiscal year 2004, when HECM refinancing first went into effect, approximately 10.3% of almost 1.27 million HECM endorsements were refinanced HECMs. That means that a little over 49,500 of the approximately total 131,000 HECMs refinanced ever (37.8%) came in 2021 and 2022.
As to the other two items, regulatory lending limits and the return to regional lending limit caps, while not surprising, it was good to read that NRMLA intends to wholeheartedly support them as they are currently structured. While the article did not go into Project 2025, it was a good overview of NRMLA’s position on three crucial issues.