Reverse mortgages are in trouble. In fact, it’s fair to say that reverse mortgages may well be gone under the Trump Administration.
Lenders love FHA-insured reverse mortgages — what are known as “Home Equity Conversation Mortgages” or HECMs. There are fees and charges to be earned with their origination and if something goes wrong HUD will cover the loss.
However, it is estimated that the HECM reserve portfolio was at negative $7.7 billion in FY 2016, down $14.5 billion from a positive $6.8 valuation in FY 2015.
The Trump Administration’s super-lean 2018 budget seeks reductions for just about everything not operated by the Pentagon. In the search for spending cuts it’s difficult to see why the new Administration will view the reverse mortgage program kindly.
Can the HECM program continue? If yes, who will pay for the losses?