The Federal Housing Administration’s (FHA) Home Equity Conversion Mortgage (HECM) program is expected to perform well, according to the budget proposal submitted to Congress by the U.S. Department of Housing and Urban Development (HUD). The proposal also includes legislative recommendations for the program.

HUD’s document shows that the HECM program is projected to operate with a credit subsidy level of -2.87% in FY 2024. This means that the program is expected to generate more receipts than it will pay out in claims in 2024, potentially marking a third consecutive year of profitability for the HECM portfolio.

The proposed budget estimates that the HECM program will outperform the entire Mutual Mortgage Insurance (MMI) Fund, which has a credit subsidy of -1.32%. HUD’s FY 2024 request of $73.3 billion is only 1.6% higher than the figure for 2023, and while this is lower than the average increase request of other agencies, it is larger than many other federal agencies’ or organizations’ budgets.

HUD’s legislative recommendations for the HECM program include proposals related to limits, non-borrowing spouses, foreclosure notices, and the current loan cap. The budget document also notes that the HECM program’s estimated credit subsidy level for the remainder of FY 2023 is estimated to be equal to -4.19%, an improvement over the actual FY 2021 figure of -2.54%. However, if the performance holds true, then the performance in 2024 will drop below the actual 2021 performance.

Overall, the budget proposal suggests that the HECM program is performing well and is expected to continue to do so in the coming years, with HUD making legislative recommendations to further strengthen the program.