September 19, 2021

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Mortgage News

Fudge Assumes HUD at Critical Time for Housing, Reverse Mortgages

The new Secretary of the United States Department of Housing and Urban Development (HUD) Marcia Fudge is take control of the country’s federal housing authority at a critical time, not just at a time when housing construction in America is at a crossroads due to multiple national crises, but also at an important time for reverse mortgage and housing problems seniors face.

Fudge, a veteran lawmaker and trailblazer herself to serve as the first African American mayor of a city in her home state, Ohio, takes office with perspectives shaped by her time in local and national politics at a time she lives in Instability has sparked an entirely new wave of Americans due to the COVID-19 coronavirus pandemic.

She also rises to the helm of HUD at a moment when the Home Equity Conversion Mortgage (HECM) program faces a number of key issues that could shape it for years to come.

Reverse mortgages and the extra attention required

Fudge comes into office at a time of change for reverse mortgage lending, and the past four years have been a major indicator of how much the industry is growing as a result of the policies and practices of Fudge’s full-time predecessor, Dr. Ben Carson. Carson’s HUD introduced a number of changes to the HECM program that were hard to swallow for many in the reverse mortgage industry at the time, but which Trump administration officials considered positive for the HECM ledger within Mutual Mortgage Insurance (MMI). Funds.

Former HUD Deputy Secretary Brian Montgomery recently spoke about the shape of the HECM program just before the presidential change, telling RMD that many of the changes made to the HUD under Carson’s leadership – including a reduction in key limiting factors (PLFs) and the Establishment of Collateral Risk Assessment – resulted in a more stable HECM book.

Former HUD Assistant Secretary Brian D. Montgomery

“Think of the reduction to the PLF. And later, with the collateral risk in mind, validating the valuation and making changes to it, ”Montgomery told RMD exclusively interview Last month. “And so, between that and the appreciation of the property price, to answer your question by just looking at it in hard numbers [HECM] The portfolio is now in far better shape than it was four years ago. But vigilance cannot be disappointed [HUD under the Biden administration has] continue to focus on it. “

Unlike other housing issues that may be prone to purely political or ideological interpretations, Trump administration officials, including Montgomery and former FHA Commissioner Dana Wade, have expressed concerns related to supporting the HECM program for future strength need not get into the dispute between the partisans Democrats and Republicans who have come to define modern affairs in Washington, DC

“We are working extensively on the Congress [HECM] I have hope for reform, ”Wade told RMD on a call with reporters on the FHA’s annual report to Congress last November. “I know this is a discussion that has been going on for a long time, I think too long. I think it is time for Congress to act. I think there have been some great reforms that we proposed as part of our real estate finance reform report, including looking at a standalone HECM capital ratio that really should be viewed in a non-partisan way. There is nothing political or partisan. It’s really just about tax administration. “

Bipartisanism, remaining HECM problems

However, it remains to be seen how “non-partisan” Fudge and the entire Biden government will perceive their predecessors’ efforts regarding the HECM program. At the Senate confirmation from Secretary Fudge Listen In January there was no mention of the HECM program and only glimpsed attention was given to housing issues affecting seniors as Democrats appeared to be more interested in discussing how other vulnerable populations could be served by Fudge’s HUD, while Republicans were more interested in previous comments made by Fudge about their party in the context of racial equality.

Vice President Kamala Harris swears in Marcia Fudge as the 18th Secretary of the United States Department of Housing and Urban Development.

When RMD sought an additional perspective on another story from the HUD, a department spokesperson responded to the exclusive interview we held with former Deputy Secretary Montgomery by saying that his comments did not necessarily relate to the Biden administration’s stance on the HECM -Note the program.

“We are aware of our former Assistant Secretary’s comments to RMD on the Home Equity Conversion Mortgage Program,” a HUD spokesperson told RMD in an email last month. “Mr. Montgomery’s view of the program from his time at the HUD certainly reflects his opinion on the program, but we wouldn’t call it an” ongoing dialogue “about the HECM program under the Biden administration.”

This could indicate a disagreement between current and previous leadership on HECM issues that remain to be addressed. Former Deputy Secretary Montgomery described what he thought some of these issues were in an exclusive interview with RMD.

“Look at some of the things we’re still trying to get over the finish line, which has to do with non-borrowed spouses and other things. We couldn’t quite get over the finish line just because they take so long.” Montgomery said. “But here, too, seniors are part of HUD’s mission to serve vulnerable populations. And obviously, HECMs go a long way in serving this population. So I can tell you it’s a responsibility that HUD takes very seriously. “

HUD in the age of COVID reduced morale

Of course, HECM is only a small part of the housing landscape overseen by the HUD and the Federal Housing Administration (FHA), and Fudge is rising to its leadership position at a time of great stress on the American housing system and larger economy. The COVID-19 coronavirus pandemic has afflicted both equally, and while more people are behind with mortgage and rent payments compared to early 2020, Fudge is also taking control of a department that some insiders believe are urgently needed by residential buildings got to .

“The ranks of HUD have been gutted, morale has never been lower, and the challenges for HUD voters have never been higher,” said David Dworkin, president and CEO of the National Housing Conference (NHC) in a report from Politico this week.

The newly installed HUD secretary Marcia Fudge makes an introductory statement on the department’s mission under her leadership.

The story also describes other structural challenges that HUD is facing and that Fudge is struggling with, including downsizing and the aging workforce embedded within the department. This emerges from a report by the HUD Office of the Inspector General (OIG) in December.

“HUD now works with less than half the staff it had 30 years ago,” says the Politico story. “And while the decline isn’t entirely due to Fudge’s predecessor, HUD lost 18.5% of its workforce in the Obama years, even though the total government workforce grew by 11%. [Former Secretary] Carson repeatedly pushed for budget proposals that would have cut HUD funding by about 15%, although Congress routinely ignored those proposals. “

HUD predicted that by 2022, 63% of its employees – including 50% of supervisors and managers – would be eligible for retirement. According to December 2020, these potential staff shortages could mean that “positive changes cannot be sustained” report Detailing the management challenges at HUD and FHA as quoted by Politico.

Ultimately, HECM still has many issues that need to be addressed by the new HUD and FHA leadership team in the months and years to come, including further improving the HECM portfolio in the MMI fund and selecting a new HECM maintenance company. There are also the broader economic realities that the department has to deal with, in addition to internal structural problems within the department itself that could cause HECM to take a back seat for some time.

All of these events and circumstances require the reverse mortgage industry to remain active and focused on serving senior customers as best it can in the face of the rocky roads ahead.