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Home equity loans the Federal Housing Administration offers to older borrowers are in a better position now that the government shutdown has temporarily ended.
There is a chance of a new shutdown when the reprieve ends in a few weeks, but assuming things are getting back to normal, Home Equity Conversion Mortgages in particular should be quick to recover because the market never really shut down completely.
“It was still running with perhaps some risk to the lenders, the risk that a loan could go bad before it gets endorsed,” Peter Bell, president of the National Reverse Mortgage Lenders Association, said in an interview.
While there was some seasonal slowing, there was unlikely any directly resulting from the shutdown, Bell noted.
During the shutdown, many lenders continued to submit new loans to the FHA at the same rate they normally do in December and January, according to Wendy Peel, a vice president at loan origination system vendor ReverseVision.
“There’s been no dip in terms of HECM loan assignments,” she said in an interview.
Most reverse mortgage lenders were comfortable continuing to make loans because they knew they had a couple of months before they had to report a loan for endorsement, and the shutdown was likely to end before then.
During a shutdown, “for 60 days, arguably, the market is OK,” Michael McCully, a partner at capital markets consultancy New View Advisors, said in an interview.
The number of HECMs endorsed annually has remained fairly stable in previous fiscal years in which endorsements were suspended due to government shutdowns.
“There was a delay, but the loans ultimately got endorsed,” said McCully.