HUD Reopens Comment Period for Reverse Mortgage Program Review
The U.S. Department of Housing and Urban Development (HUD) has announced an extension of the public comment period for its review of federal reverse mortgage programs. This decision was published Wednesday in the Federal Register, reopening opportunities for stakeholders and the public to provide input on the Home Equity Conversion Mortgage (HECM) and HECM Mortgage-Backed Securities (HMBS) programs.
Originally, HUD issued a request for information in October, seeking feedback on ways to improve senior homeowners’ access to home equity and to explore potential innovations within these programs. The initial 60-day comment period concluded on December 1, but HUD has now extended the deadline to January 5, 2026. The agency has also indicated it will consider late submissions when possible.
Background on HECM and HMBS Programs
The HECM program is the most widely used reverse mortgage product, designed to help seniors convert part of their home equity into cash without requiring monthly mortgage payments. The program is federally insured and administered by HUD through the Federal Housing Administration (FHA). HMBS, on the other hand, are securities backed by pools of HECM loans, providing liquidity to the reverse mortgage market.
As the senior population grows, HUD’s review aims to ensure these programs remain viable, accessible, and responsive to the needs of older homeowners. The agency’s outreach reflects an effort to balance consumer protections with program flexibility and innovation.
Industry Feedback and Recommendations
Several industry groups have already submitted detailed recommendations to HUD. The Mortgage Bankers Association (MBA) provided seven reform proposals in late November. More recently, the National Reverse Mortgage Lenders Association (NRMLA) submitted an extensive 11-page letter outlining a broad range of suggestions for both the HECM and HMBS programs.
NRMLA’s letter focuses heavily on improving the HECM financial assessment (FA) process. Introduced in 2015, the FA aims to reduce reverse mortgage foreclosures by evaluating borrowers’ ability to pay property taxes and insurance. While NRMLA supports maintaining the effectiveness of this assessment, it advocates for streamlining procedures and reducing documentation burdens to increase borrower flexibility.
Key NRMLA Proposals to Streamline Financial Assessments
- Reducing Paperwork: NRMLA suggests simplifying income verification by allowing a single proof of income instead of the current requirement for two forms of Social Security verification.
- Electronic Verification: The group recommends using direct electronic verification through the Social Security Administration to expedite the process.
- Waiving Documentation for Low-Risk Borrowers: Borrowers with high FICO scores could be exempt from some documentation requirements.
- Unsecured Debt Payoff at Closing: Allowing borrowers to pay off unsecured debts such as credit cards or personal loans at closing, a practice authorized under the 2017 HECM Final Rule, could reduce post-closing defaults and improve competitiveness against proprietary reverse mortgage products.
- Homeowners Association (HOA) Payment History: NRMLA proposes reducing the required HOA payment history from 24 months to 12 months and waiving this requirement for properties with low HOA fees or borrowers with strong credit histories.
- Retirement Asset Documentation: For borrowers aged 74 and older, the group recommends eliminating full documentation requirements for retirement assets except for Employee Stock Option Plans (ESOPs).
Proposed Changes to Life Expectancy Set-Aside Policies
NRMLA also addressed the Life Expectancy Set-Aside (LESA) policies, which require borrowers to reserve a portion of their loan proceeds to cover future property charges such as taxes and insurance. The association specifically called for removing the 75% cap on partial LESAs and allowing voluntary contributions after closing to cover these expenses.
According to NRMLA, the current 75% rule acts as an overly conservative barrier that limits responsible borrowers’ access to HECM proceeds without a corresponding increase in risk reduction or safety. Eliminating this cap could enable more qualified seniors to benefit from the program.
Implications for Senior Homeowners and the Housing Market
The extended comment period and the range of proposals reflect ongoing efforts to modernize reverse mortgage programs amid a changing demographic landscape. For senior homeowners, these potential reforms could mean easier access to home equity with less administrative burden and greater flexibility.
From a market perspective, enhancing the competitiveness and efficiency of the HECM and HMBS programs may encourage broader participation by lenders and investors. This could lead to increased liquidity and innovation in the reverse mortgage sector, ultimately supporting the financial security of aging homeowners.
As HUD continues to gather feedback, the final policy adjustments will be closely watched by industry stakeholders, consumer advocates, and policymakers aiming to balance consumer protections with program accessibility.
Source: https://www.housingwire.com/articles/hud-reverse-mortgage-comment-period/
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