NRMLA’s Steve Irwin on the FHA report, HECM changes and more

As the reverse mortgage industry prepares to say goodbye to the tumultuous year of 2024, there is positive news for the Federal Housing Administration (FHA)’s Home Equity Conversion Mortgage (HECM) program – which backs the majority of the nation’s reverse mortgages – provides a sense of overall health for the program, despite some of the business challenges faced this year.

Steve Irwin, chairman of the National Association of Reverse Mortgage Lenders (NRMLA), sat down for a recent interview with HousingWire‘s Reverse Mortgage Daily (RMD). Irwin discussed some of the association’s outlook for the industry and the state of the FHA’s Mutual Mortgage Insurance (MMI) Fund.

FHA Annual Report, HECM Program

Irwin responded positively to news of this year’s HECM activities within the MMI Fund, which continues to operate well above regulatory requirements.

The HECM program recorded a positive capital ratio for the total government-backed portfolio for the fourth year in a row. Positive levels of house price growth were seen as a key driver of the 7.78% increase in the standalone HECM capital ratio compared to the previous year.

But Irwin also credits the changes made to the HECM program in recent years as important stabilizing factors for the company, despite the challenges they may pose for some industry participants and NRMLA members.

“Well, the initial reaction, of course, is that I – and our board – remain very pleased that the HECM program is continuing its strong performance,” Irwin said. “It just shows that the adjustments and adjustments made over time continue to strengthen the stability of the program.”

Part of this performance is certainly due to the increase in house prices. But Irwin also notes that this metric has moderated recently, further emphasizing the credit he believes should be given to the sometimes disruptive HECM program changes.

“[The strong performance] is also attributable to the financial assessment, the collateral risk assessment and the secondary assessment – ​​all areas that have frustrated and continue to cause some frustration to our members,” Irwin said. “That doesn’t mean we can’t look for ways to improve those aspects of the program, but they do strengthen its stability. It is important to understand how important those changes have been.”

Criticism of major program changes

When asked whether criticism of these changes – particularly second reviews – from industry professionals has waned in the years since they were first passed, Irwin said the issues are still often discussed. But he added that there are opportunities to advocate for the improvement of controversial policies.

“When something changes or there’s something new, there’s usually initial frustration,” Irwin says. “Financial assessment, for example [served as] a huge change in the way loans were originated and how the whole process worked. But now it’s just the way things are done. Can we argue for changes to that process? Absolutely – and we will continue to do so.”

The same attitude applies to the collateral risk assessment process, which can sometimes result in the need for a second property appraisal. Irwin said he strongly believes there are ways to validate value, but the nature of the HECM program, as a non-recourse program, requires the valuation to be accurate. Some of this also extends to the private-label reverse mortgage market.

“But are there ways to streamline the process, or can we argue for cost savings or efficiency improvements? Absolutely,” he said. “It doesn’t have to be a full second assessment. There are technologies and data sets available that can validate home values, and I believe we should continue to explore those options.”

But the program remains sensitive to home price growth, and industry participants and NRMLA members should not lose sight of the fact that a standalone analysis of the HECM program on its own “continues to demonstrate its validity,” he said. he. The association continues to evaluate areas that the FHA report shows are worth investigating through further advocacy in 2025 and beyond.

Look for more from Steve Irwin on HousingWire’s RMD soon.