This article was originally published at: https://breaking9to5.com/hecm-stability-challenges/
The Home Equity Conversion Mortgage (HECM) program is currently facing stability and viability challenges. These issues have arisen from the 2022 collapse of a significant industry lender and its subsequent removal from the HECM-backed Securities (HMBS) program. If these challenges are not adequately addressed by the U.S. Department of Housing and Urban Development (HUD) and Ginnie Mae, they could warrant congressional scrutiny.
These concerns were raised in a letter submitted to Ginnie Mae President Alanna McCargo by Sen. Mike Braun (R-Ind.), the ranking minority member of the U.S. Senate Special Committee on Aging. Sen. Braun is seeking more information on what the government-owned company is doing to ensure the continued viability of the HECM and HMBS programs in serving U.S. seniors.
HECM Concerns Outlined
Sen. Braun views the federal reverse mortgage program as a crucial one for serving the needs of U.S. seniors. He expressed his concerns in the letter, stating, “Reverse mortgages can be a lifeline for older homeowners needing access to cash during retirement, and recent failures threaten the financial security for hundreds of thousands of seniors. Mismanagement of this program could lead to the collapse of the reverse mortgage market that hurts both seniors and taxpayers.”
Recent concerns regarding the collapse of Reverse Mortgage Funding (RMF) and its subsequent removal from the HMBS program prompted the senator to reach out. He is also seeking information regarding the “proposed policy solutions to safeguard the reverse mortgage market in the future.”
Questions for Ginnie Mae
Sen. Braun has several questions for Ginnie Mae regarding its stewardship of the HMBS program. He is particularly interested in understanding how seniors were impacted by this glaring failure. He also requests detailed insights into Ginnie Mae’s actions prior to and following the bankruptcy of RMF and more information on steps taken to improve troubled issuer management practices that threaten market stability.
‘HMBS 2.0,’ TCB Litigation
In the letter, Sen. Braun also mentions the January announcement that Ginnie Mae was exploring the creation of a new reverse mortgage-backed security product. This product would enable the acquisition of loans from an HMBS pool above the existing 98% maximum claim amount (MCA) requirement. He has requested extensive information on the development of this product.
Sen. Braun also focuses on the legal dispute currently playing out between Ginnie Mae and Texas Capital Bank (TCB). The bank alleges that the government-owned company “extinguished, in return for no consideration, TCB’s first priority lien on tens of millions of dollars in collateral” stemming from the HECM and HMBS programs.
The senator requested answers to his questions by May 10, 2024. A representative from HUD declined to comment on the contents of the letter. Democratic leaders in the Senate Committee on Aging were also contacted but did not immediately respond.
This article was originally published at: https://breaking9to5.com/hecm-stability-challenges/
