The
Home
Equity
Conversion
Mortgage
(HECM)
program
faces
stability
and
viability
challenges
stemming
from
the
2022
collapse
of
a
major
industry
lender
and
its
extinguishment
from
the
HECM-backed
Securities
(HMBS)
program,
which
could
warrant
congressional
scrutiny
if
these
challenges
are
not
properly
addressed
by
the


U.S.
Department
of
Housing
and
Urban
Development
(HUD)
and


Ginnie
Mae.

This
is
according
to

a
letter
obtained
by
RMD
and
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.

Braun
submitted
the
letter
to
McCargo
late
last
week.
He
seeks
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.

Concerns
outlined

Sen.
Braun
sees
the
federal
reverse
mortgage
program
as
an
important
one
for
serving
the
needs
of
U.S.
seniors,
according
to
the
letter.

“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,”
Braun’s
letter
read.
“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
extinguishment
from
the
HMBS
program
prompted
the
senator
to
reach
out.
He
also
seeks
information
regarding
the
“proposed
policy
solutions
to
safeguard
the
reverse
mortgage
market
in
the
future.”

Braun
recounted
the
situations
that
ultimately
led
to
the
bankruptcy
of
RMF,
its
extinguishment
from
the
HMBS
program
and

Ginnie
Mae’s
seizure
of
the
company’s
portfolio,
which
he
says
grew
Ginnie
Mae’s
balance
sheet
overnight
“by
50
percent
while
the
agency
scrambled
to
service
a
large,
seasoned
reverse
mortgage
portfolio,”
the
letter
read.

This
led
to

an
investigation
by
HUD’s
Office
of
the
Inspector
General
in
late
2023.
Braun
added
that
“deeper
Congressional
scrutiny
is
also
warranted”
for
HECM
program
issues
stemming
from
these
events.

Questions
for
Ginnie
Mae

Braun
seeks
responses
from
Ginnie
Mae
to
several
questions
regarding
its
stewardship
of
the
HMBS
program,
particularly
“to
understand
how
seniors
were
impacted
by
this
glaring
failure,”
he
wrote.

Braun
also
requests
“detailed
insights
into
Ginnie
Mae’s
actions
prior
to
and
following
the
bankruptcy
of
RMF”
and
requests
more
information
on
“steps
taken
to
improve
troubled
issuer
management
practices
that
threaten
market
stability.”

Braun
also
asks
about
other
efforts
Ginnie
Mae
is
contemplating
to
“strengthen
the
secondary
market
for
HECM
loans,”
the
letter
read.
The
senator
is
looking
for
information
regarding
the
direct
impacts
to
senior
borrowers
that
the
collapse
of
RMF
may
have
had,
whether
or
not
there
was
a
lapse
in
servicing
HECM
loans
stemming
from
the
incident,
and
whether
or
not
there
was
a
plan
for
handling
distressed
issuers
prior
to
the
collapse
of
the
lender.

Previously,
Ginnie
Mae
has
said
that
the
transition
for
borrowers
was
“seamless,”
explaining
that
the
acquisition
of
RMF
assets
“was
accomplished
without
negatively
impacting
borrowers,”
according
to
a

January
2023
statement
from
McCargo.

Ginnie
Mae
has
been
open
about
the
strain
that
the
assumption
of
the
RMF
portfolio
has
placed
on
its
resources.

In
HUD’s
recent
congressional
justifications
for
the
president’s
2025
budget
proposal,
the
company

requested
additional
budget
authority
that
would
go
to
“support
for
any
future
defaults,
oversight
of
the
HMBS
application
process,
performing
operational
impact
assessments,
engaging
with
business
partners
as
needed,
and
supporting
any
new
products
that
may
come
out
of
current
program
enhancement
efforts,”
according
to
the
document.

The
company
would
also
seek
additional
staff
to
continue
the
goal
of
stabilizing
the
HMBS
market,
the
document
stated.
Of
the
$24.6
million
in
additional
funding
requested,
$4.4
million
would
go
toward
the
hiring
of
19
additional
full-time
equivalent
employees
to
more
adequately
manage
the
HMBS
portfolio.

‘HMBS
2.0,’
TCB
litigation

In
the
letter,
Braun
also
mentions
the
January
announcement
that
Ginnie
Mae
was
exploring
the
creation
of

a
new
reverse
mortgage-backed
security
product,
which
would
enable
the
acquisition
of
loans
from
an
HMBS
pool
above
the
existing
98%
maximum
claim
amount
(MCA)
requirement.

Braun
has
requested
extensive
information
on
the
development
of
this
product.
This
includes
the
analyses
that
suggested
the
need
for
a
new
product
in
this
space;
the
associated
goals,
risks
and
expected
outcomes
that
could
stem
from
such
a
product;
how
it
would
impact
loans
already
being
serviced
by
FHA
and
Ginnie
Mae;
and
the
costs
associated
with
establishing
it.

Braun
also
focuses
a
line
of
questioning
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.

Braun
asks
about
the
processes
Ginnie
Mae
used
to
“locate
a
financier”
for
RMF;
details
on
the
steps
and
considerations
made
prior
to
extinguishing
RMF
from
the
HMBS
program;
and
when
Ginnie
Mae
became
aware
of
the
potential
for
RMF
to
fail.

Braun
also
asks
McCargo
if
Ginnie
Mae
believes
that
their
“actions
in
extinguishing
mortgage
servicing
rights
from Texas
Capital,
not
as
a
matter
of
law
but
as
a
matter
of
reputation,
has
damaged
Ginnie
Mae’s
dependability,”
and
what
the
implications
would
be
if
lenders
decided
to
pull
out
of
the
HECM
and
HMBS
programs
due
to
caution
stemming
from
the
TCB
dispute.

The
senator
requested
answers
to
his
questions
by
May
10,
2024.

When
reached,
a
representative
from
HUD
declined
to
comment
on
the
contents
of
the
letter.
RMD
also
reached
out
to
Democratic
leaders
in
the
Senate
Committee
on
Aging
but
did
not
immediately
receive
a
response.

Look
for
more
from
Sen.
Braun’s
inquiry
into
the
HECM
and
HMBS
programs
on
RMD
soon.

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