Where does HUD’s potential reverse mortgage revamp stand?

“The HECM and HMBS programs do not inhibit the private sector. On the contrary, they provide a benchmark ‘target’ for private lenders to attain and exceed,” Andrew Draper, a reverse mortgage specialist at Community First National Bank, wrote in response to a question listed on the request for information. “By establishing a federally backed standard, HUD encourages private sector innovation to provide specialized, competitive products that supplement the government’s baseline.”

HousingWire’s Reverse Mortgage Daily contacted HUD about a potential timeline for its next steps, including a rulemaking process, but did not receive an immediate response.

Leading lender feedback

Mutual of Omaha, which was the country’s top HECM lender in 2025 with 5,740 endorsements, focused on two potential improvements to the HECM program in a letter signed by CEO Terry Connealy.

The letter echoed other recent public comments by pushing for lower upfront mortgage insurance premiums, which currently stand at the lesser of 2% of a home value’s or 2% of the HECM limit of roughly $1.25 million.

Connealy also wrote that the Housing and Economic Recovery (HERA) Act of 2008 — enacted in the wake of the subprime mortgage crisis —  includes provisions that “restrict access and consumer choice by prohibiting licensed financial professionals from helping seniors evaluate or originate a HECM.” While the rules were “rightly intended to prevent abusive sales practices,” he argued they prevent seniors from receiving trusted professional advice and “limits access to holistic retirement planning.”

Since HERA’s implementation, he wrote that “strong safeguards” such as borrower counseling, a financial assessment and limits on drawing from proceeds in the first year following origination have been added to the HECM program. He called for the law to be modernized through Congress so that financial advisers can offer better assistance, while maintaining prohibitions on bundling reverse mortgages with other financial products.

Finance of America submitted an unsigned letter to the agencies that listed six “core policy objectives.” Among these goals, FOA wrote that it seeks to enable seniors to age in place and address the retirement crisis; recirculate trapped home equity into the U.S. economy; and reduce the federal government’s operational footprint in reverse mortgages through the deployment of private capital.

To advance these objectives, FOA proposed three key changes that would be “supported by complementary operations and consumer-focused enhancements.”

The lender suggested that FHA transition to an “insurer-only role” by ending the assignment of HECMs that reach 98% of their maximum claim amount while removing the related mandatory buyout requirement under HMBS rules. “FHA would continue to provide insurance protection while exiting the loan ownership and servicing function,” the letter explained.

Second, FOA calls for the allowance of HECM pooling for the life of the loan and for 100% of the unpaid principal balance to be eligible for securitization. “This change would mitigate issuer liquidity risk, attract broader private-capital participation and reduce systemic concentration,” FOA wrote.

Third, the company is looking to improve the consumer experience in multiple ways. It proposed the reintroduction of a HECM Saver-style product — which was discontinued more than a decade ago — to deliver lower upfront costs for lower-leverage borrowers. FOA also pushed for automated valuation models to replace appraisals on low-risk loans.

Advocating for HMBS 2.0

Ryan LaRose, chief client and industry relations officer for Celink, said his company supports two key changes to the HMBS program which would benefit Celink clients that actively issue pools.  

LaRose noted that Ginnie Mae rules currently prohibit the issuance of tail pools for HECM loans declared due and payable. This forces issuers to pay a laundry list of expenses —  including appraisal, inspection and attorneys’ fees — associated with foreclosure and real estate-owned (REO) auctions. Celink said the “substantial financial burden” posed by these expenses would be better managed by allowing issuers to pool post-due and payable advances.

Celink is also advocating for the advancement of the HMBS 2.0 program that was previously proposed by Ginnie Mae leadership during the Biden administration.

The agency released a final term sheet for the proposal in November 2024. But its implementation has stalled under the Trump administration — delays that could be tied to reported staff cuts at Ginnie Mae and leadership vacancies that were more recently settled by the Senate confirmations of Frank Cassidy at FHA and Joseph Gormley at Ginnie Mae.

The lack of an alternative to traditional HMBS issuance affects about 15% of loans that reach the maximum claim amount (MCA) threshold and causes financial hardship for issuers until they reach a resolution, which can take years, Celink said.

“We heard directly from entities that were exploring entry into the reverse mortgage market that the absence of a sustainable solution for this subset of loan was the key factor in their decision not to proceed,” LaRose wrote.

Brandon Milhorn, president and CEO of the Conference of State Bank Supervisors (CSBS), wrote that his organization also supports the “prompt finalization and implementation of liquidity enhancements, such as those outlined in the proposed HMBS 2.0 program.”

“The repurchase requirement (at 98% of the MCA), funded temporarily by the Issuer, often creates a substantial liquidity burden because the Issuer must advance the funds to investors, but may not be able to immediately convey the loan to HUD due to outstanding documentation issues, unresolved borrower defaults or other procedural requirements,” Milhorn wrote.

“This structural timing gap has historically placed immense strain on Issuer capital, contributing to a major bankruptcy in the reverse mortgage industry in late 2022 and creating a clear risk to the market.”