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Gate House Strategies Chairman Brian Montgomery, in a piece for Housing Wire, shared a few of his thoughts on the opportunities awaiting the new HUD Secretary, Scott Turner.
As HUD turn 60, Brian writes, Secretary Turner, takes over as the 19th secretary at an extraordinary time: “The challenges in the housing market are many, including persistently high mortgage rates, a paucity of housing inventory, growing demand for subsidized housing, record levels of homelessness, and large-scale redevelopment needs following natural disasters.”
Turner, who led President Trump’s Opportunity Zones initiative in the first term, will lead “a $73 billion enterprise that additionally controls more than $2.6 trillion in government-guaranteed mortgages.” More than $43 billion of HUD’s current budget assists over 4.6 million households through public housing, with extraordinary unmet needs. This need and the rise in homelessness is not unrelated, Brian says, to “the housing affordability crisis that millions of Americans are encountering.”
Turner will head HUD’s robust fair housing enforcement while “resolving the Biden Administration’s withdrawal of the previous Trump administration “disparate impact” rule.”
Secretary Turner faces uncertainty with FHA’s $1.5 trillion portfolio, despite record levels of capital, given the large number of redefaults in recent months and “more than 1.7 million FHA borrowers who have utilized the “partial claim.” The HECM program has been under pressure, also despite strong capital levels “due to the current interest rate environment as “higher interest rates have slowed the origination volume and significantly impacted lenders’ warehouse lines.”
“Often overlooked,” Brian wrote, is Ginnie Mae, “whose senior leadership is understaffed with recent retirements and staff departures” and which, with an important link to global financial markets “will need to transition its Mortgage-Backed Securities (MBS) platform from pool-level to loan-level functionality.”
In their recent article for Reverse Mortgage Daily, Gate House Partners Keith Becker, Dror Oppenheimer, and Michael Marshall discuss the pressures in the housing finance market relative to reverse or home equity conversion mortgages (HECMs), suggesting action is needed to avoid further failures of Ginnie Mae HECM servicers and issuers.
If reverse servicers and “issuers” are a liquidity lifeline soon, the authors opined, “there could be additional failures, with Ginnie Mae and possibly, taxpayers holding the bag. Further harm can be avoided if Ginnie Mae provides support and the Federal Housing Administration (FHA) makes some critical changes to its HECM rulebook.”
Gate House illuminates the challengers facing HECM servicers and issuers as a result of both the rapidly rising interest rate environment and esoteric HUD policies that differ from the GSEs, for example, the fact that Ginnie Mae issuers are required to fund the buyout of “due and payable” loans, often for a period of two to three years, and advance tax and insurance payments when the loans are bought out of pools.
In their recent article for Reverse Mortgage Daily, Gate House Founding Partners Brian Montgomery, Keith Becker and Dror Oppenheimer discuss the implications of the first positive capital ratio for the HECM program in six years.
The Gate House team, who worked together at the Federal Housing Administration managing the HECM program, provided their unique perspective and explained that important policy changes, and most certainly strong home price appreciation, have contributed to the substantial improvement in the HECM capital ratio.
Nevertheless, they argued, the results do not “provide a reason for complacency or assurance of future (positive) results” and therefore continued vigilance to ensure the program “is not continuously subsidized by the premiums … in the forward book, will be vital for the HECM program to continue to serve its mission.”
Montgomery is the only person to have served as FHA Commissioner twice under three presidents. Becker served as the Deputy Assistant Secretary and Chief Risk Officer for FHA. Oppenheimer served as a Senior Advisor to the Commissioner of FHA.
Gate House Chairman Brian Montgomery recently spoke with Chris Clow of Reverse Mortgage Daily to discuss HUD’s reverse mortgage (Home Equity Conversion Mortgage or “HECM”) program and the impact of that program in the recent budget request. The growth in the Secretary-held HECM portfolio which has been significant in recent years, and the challenges presented to servicing that portfolio, likely contribute to the Biden Administration requesting an additional $50 million in its budget request.
“Due to the structure of the program,” Montgomery said, “the Secretary-held portfolio has grown significantly in the last 5 years (approximately 150,000 loans), and it keeps growing.”
Montgomery, who led FHA twice under three presidents and recently served as Deputy Secretary of HUD, added that “This process requires a highly competent Servicer to handle a highly complex product for one of HUD’s key constituents — seniors.”