Companies
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 and CEO Keith Becker recently opined in the M Report on the favorable condition of the FHA Mutual Mortgage Insurance Fund.
In their article, Montgomery and Becker argue that FHA must be prepared to weather adverse events in the future similar to the wake of the Financial Crisis in 2008 or the COVID-19 pandemic. As pressure mounts to reduce mortgage insurance premiums (MIP), continued commitment to FHA’s countercyclical role would dictate caution. FHA must work, they wrote, “to put itself in a position to best serve low- to moderate-income borrowers who will be most affected should private markets constrict (which history has shown sometimes do).”
In urging caution on mortgage insurance premiums, they cite the Annual Report’s acknowledgment that the assumptions underlying the financial position of the fund can “change materially and quickly with changes in both actual and projected home values.”
Montgomery and Becker caution that unintended effects of MIP changes could occur, and FHA would be wise to keep available “all options that help to expand opportunities for low- to moderate-income homebuyers by deploying some of the excess capital into new programs, products, or underwriting policies.”