White House expects reverse mortgages to keep performing

Document details

The guaranteed loan subsidy rate — which measures the receipts produced by the program for the federal government — was -2.87% in 2024. The negative rate indicates that HECMs generated receipts, whereas a positive figure would have required a subsidy from the government on the portfolio, costing taxpayers money.

The negative rate is projected to dip slightly this year to -2.65% before rising again in 2026 to -3.13%.

The same trend is observed in the HECM portion of the MMI Fund’s guaranteed loan subsidy budget authority. In 2024, the figure stood at -$383 million, and it’s projected to fall slightly to -$376 million in 2025 before a larger 2026 projection of -$474 million. The figures are identical for actual and estimated MMI HECM budget outlays.

The budget document continues to show that forward mortgage insurance, understandably, continues to outpace HECM insurance. OMB estimates about $300 billion for projected forward mortgage insurance volume versus the $15 billion figure it provides for the HECM program.

“The Budget requests $160 million in the MMI Program account for administrative expenses to support a range of [Federal Housing Administration (FHA)] functions, such as loan underwriting and servicing, claims processing, and risk monitoring,” the document explained. “The Budget also requests a limitation of $400 billion on loan guarantees for the MMI Fund.”

Above the stated estimated insurance figures, OMB also accounts for “additional commitment authority available in case these amounts are exceeded during execution.”

Further information about the perspective of the Trump administration on the HECM program will come when HUD releases its specific fiscal year 2026 budget in brief. But this is also based on estimates from OMB and not actual cash, so it’s possible that some of these figures could be revised by the time 2025 and 2026 data is available.

Prior report

In the final MMI report of the Biden administration, submitted as part of HUD’s Annual Report to Congress in November 2024, the HECM portion of the MMI Fund reached a positive capital ratio for the fourth year in a row on the overall government-backed portfolio.

In 2023, the HECM capital reserve declined slightly due to weaker levels of home-price appreciation. Last year, however, that metric was stronger, leading to a 7.78% increase in the HECM standalone capital ratio compared to one year earlier.

The health of the HECM book of business remained strong at that time from FHA’s perspective, as its economic value increased while the overall portfolio recovered from prior issues. But it remains to be seen what impacts proposed cuts to HUD funding could have on FHA programs, including reverse mortgages.

Looking ahead

The HECM program was not explicitly mentioned in the “skinny budget” proposal, but HUD’s outstanding budget document could include new information that might list either legislative or administrative recommendations for the HECM program.

In a February 2025 editorial published by HousingWire, former HUD deputy secretary and FHA Commissioner Brian Montgomery mentioned the department’s reverse mortgage programs as issues that now-incumbent HUD Secretary Scott Turner will need to navigate during the second Trump term.

“HUD’s reverse mortgage portfolio continues to experience stress largely due to the current interest rate environment,” Montgomery wrote at the time. “Despite a seemingly strong capital position as reflected in the most recent report to Congress, higher interest rates have slowed the origination volume and significantly impacted lenders’ warehouse lines.”