The Home Equity Conversion Mortgage (HECM) program continues to deliver strong results, marking its fourth consecutive year of positive economic value. According to the Department of Housing and Urban Development’s (HUD) 2024 Annual Report to Congress, the HECM portfolio remains a vital component of the nation’s housing finance ecosystem, with several encouraging trends reported.

In this blog, we break down the highlights of the report and examine the factors driving the program’s success.

HECM Program: A Positive Economic Outlook

The HECM program has demonstrated consistent financial stability, evidenced by its 2024 metrics:

• Capital Ratio: The stand-alone capital ratio for the HECM portfolio reached an impressive 24.50% in fiscal year (FY) 2024, significantly outpacing the forward mortgage portfolio’s 10.88% capital ratio. Both figures exceed the congressionally mandated minimum of 2%, reflecting strong program performance.
• Average Maximum Claim Amount (MCA): The MCA rose to $504,027, a modest increase from $490,417 in FY 2023, signaling sustained demand and higher valuations in the HECM market.
• Borrower Age Trends: The average borrower age edged upward to 75.23 years, slightly higher than the 74.84 years recorded in FY 2023.
• Decline in HECM Refinances: Refinances dropped to 8.87% of total endorsements, down from 13.71% in FY 2023, reflecting potential stabilization in borrower refinancing behavior.
• Principal Limit Utilization: The average principal limit in FY 2024 was 44.36% of the maximum claim amount, a decline from 46.94% the previous year, suggesting shifts in borrower behavior or product structuring.
• Insurance Claims Reduction: FHA insurance claims fell to $5.47 billion in FY 2024 from $5.71 billion in FY 2023, with most being Type 2 claims resulting from loan assignments to FHA at 98% MCA.

HECM Volume by State

While state-specific HECM data isn’t detailed in the report, the program’s growth underscores its importance as a retirement planning tool across the United States. States with higher housing values and senior populations continue to lead in HECM adoption.

Why These Numbers Matter

For Borrowers

The HECM program offers seniors aged 62 and older a viable financial option to access home equity while maintaining ownership. The rising MCA and borrower age reflect the evolving demographics and financial needs of retirees.

For Lenders and Stakeholders

A robust capital ratio ensures program sustainability, fostering lender confidence and encouraging participation. Declining refinance rates and claims further underscore the program’s resilience and effectiveness.

For Policymakers

The HECM portfolio’s strong economic performance reaffirms its role as a critical housing finance tool. Continued monitoring and optimization will ensure it remains a secure and accessible option for senior homeowners.

Looking Ahead

The HECM program’s future hinges on balancing borrower needs, economic conditions, and policy adjustments. With a focus on maintaining financial stability, HUD’s oversight ensures the program will continue to benefit stakeholders while upholding its economic integrity.

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Source: FHA Annual Report

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