Determination on FHA Treasury Draw Set for FY 2013 Yearend

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Shaun Donovan, U.S. secretary of housing and urban development, speaks at the Bloomberg Washington Summit in Washington, D.C., U.S., on Tuesday, May 1, 2012. The Obama administration is still pushing to lower the number of families in foreclosure and limit number of new foreclosures, Donovan said. Photographer: Joshua Roberts/Bloomberg *** Local Caption *** Shaun Donovan

There will not be a final determination made on whether a Treasury draw will be needed to support the Federal Housing Administration until the end of the current fiscal year, and in the meantime the loan program with most fragile financial future in its budget continues to be the reverse mortgage program.

Noting that there are “some who say we should not have a reverse mortgage program,” Shaun Donovan, secretary of the Department of Housing and Urban Development, said in response to a question during a press conference on HUD’s FY 2014 budget plan he conditionally supports it.

He said he believes the FHA’s reverse mortgage program, the Home Equity Conversion Mortgage program, “can be an important part of helping seniors responsibly use home equity” to meet their housing needs but only if “responsibly done.”

“We believe a series of changes needs to be made to better implement the program and to better protect seniors,” Donovan said.

Further reverse mortgage reform is in the works that goes beyond a moratorium on the full draw program, Donovan said, but without timely congressional authorization and budget needed, more drastic cuts may need to be made that HUD officials believe could make the HECM program “unusable.”

He said among further HECM reforms proposed are escrows for taxes and insurance.

Donovan pledged that HUD would continue supporting mortgage and housing programs in line with President Obama’s stated aims of supporting middle-class opportunities in America but also noted the reverse mortgage program has caused outsized losses to FHA.

He stressed that FHA and Ginnie Mae’s roles have been critical to housing/home price recovery and there are key measures to protect the FHA in the budget including the “substantial changes” and address financial concerns stemming from certain problematic vintages from its book of business.

Donovan said newer FHA loans are safe and performing well. He said he does not believe it is responsible for increase certain financial hurdles for those borrowers. The agency will continue to enforce collections on older loans that have been hurting the FHA’s finances, Donovan said.

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