September 19, 2021

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Mortgage News

Infrastructure Package and Delayed Budget Proposal Push Reverse Mortgages to the Side

While specific Congressional action on the Home Equity Conversion Mortgage (HECM) program remains unlikely due to the current climate in Washington, DC, other major initiatives actively spearheaded by Congressional Democrats and President Joe Biden’s administration may have one Affecting many reverse mortgage-related issues affecting industry professionals and the demographic as a whole. Above all, this includes an infrastructure plan currently being funded by the White House.

However, the White House is also delaying the submission of a new budget proposal to Congress, which would give participants and stakeholders in the reverse mortgage industry a much clearer idea of ​​where the Home Equity Conversion Mortgage (HECM) program lies within the priorities of the current administration. Until a proposal is made, it will be difficult to determine the administration’s housing priorities and the general view of the action required in relation to HECM.

This emerges from a panel discussion on Legislative Priorities in Congress 2021 held last month at the National Reverse Mortgage Lenders Association (NRMLA) Virtual Policy Conference.

The infrastructure plan

President Biden, best known as the American Families Plan, has cited this legislation as another sizeable expense bill, with new spending of $ 1 trillion and additional tax credits of $ 800 billion.

Much of the spending is aimed at expanding access to education and childcare, including funding universal pre-kindergarten, a federal paid vacation program, measures to reduce childcare costs, subsidized adult education centers for those seeking higher education, financial assistance to students at colleges that have historically served the color communities, the expansion of the Affordable Care Act, and new, targeted efforts to reduce poverty; according to to the New York Times.

As pointed out by a policy maker advocating the reverse mortgage industry, the general bustle and political polarization in Congress are likely to result in targeted changes to the HECM program unlikely in the short termHowever, that does not mean that elements of the comprehensive new infrastructure package will not be relevant for the reverse mortgage industry.

“Among many objects, [the American Families Plan] will include funding for elderly care, child care, parental and emergency leave, free community college, etc., ”said Melody Fennel of Fennel Consulting in Arlington, Virginia at the Virtual Policy Conference. “The cost is expected to exceed $ 1 trillion and be paid for through a series of tax increases, this time on the individual side of the tax law.”

Housing relevance of the infrastructure package

Administration officials with more direct relevance to housing have also tried to redefine what “infrastructure” means as a concept in modern America, all the way through to Secretary of the United States Department of Housing and Urban Development (HUD) Marcia Fudge.

“At some point you realize that the infrastructure is a foundation,” said Secretary Fudge in a video message released by the White House in late April. “Housing is one of the most important foundations a family or a person has. About 11 million people in this country pay more than 50% of their total income for rent. It’s not affordable. “Affordable” means that I can live decently and do all the other things that are necessary for a decent life. “

HUD Secretary Marcia Fudge discusses the concept of infrastructure in the modern US

Secretary Fudge also discussed the need to expand broadband Internet access availability to rural communities, citing the need created by the COVID-19 coronavirus pandemic for more people to work effectively from home.

Of course, the true measure of the HECM program and its position in the new administration’s priorities will be more fully realized when the White House puts forward its budget proposal for 2022. In February 2020, the administration of President Donald Trump released his final budget proposal which highlighted the priorities of the HECM program at the time.

This included proposals to permanently remove the limit on the number of FHA-insured HECM loans. a waiver of the HECM advisory obligation; an update to the actuarial analysis used by the FHA to determine the adequacy of its HECM insurance premiums; and an imposition of land credit limits to replace the current national credit limit.

The Biden budget proposal is still pending

As of mid-May, President Biden’s White House has not yet published a budget proposal necessary to determine the HECM program’s position in the administration’s housing priorities. This is also made difficult by the fact that there was a presidential change relatively recently, which further obscures the Biden White House’s view of certain programs – including HECM – in direct comparison with its Trump predecessors.

“It starts with OMB and the President’s budget, which has been significantly delayed this year for a variety of reasons, including political and strategic reasons,” said David Horne, government relations expert and former chief of staff at HUD under Secretary Steve Preston in the state last Months of the George W. Bush Administration. “And when that is revealed, we will have a better understanding of where the HECM program is because there is one important attribute, and that is whether it is breaking even or losing money.”

As pointed out by Scott Olson at the Virtual Policy Conference, Horne agrees that the likelihood of movement in the HECM program – or even movement in broader FHA programs – is relatively small.

“I think in all likelihood we may see little or no legislation affecting us regarding the FHA program or the FHA programs in general, also because there doesn’t seem to be a major housing crisis,” Horne said . “And besides, because of the processes in the Senate and House of Representatives, all important points can only go through the so-called” reconciliation process “that we saw with the last successful legislation signed by the President.”