New View Advisors: Fha Report Reveals Hecm Program Is No Longer A Financial Risk

The Home Equity Conversion Mortgage (HECM) program is no longer a financial problem, according to commentary published Tuesday by New View Advisors about the Federal Housing Administration (FHA)’s 2025 report on the Mutual Mortgage Insurance Fund (MMIF).

The FHA published its fiscal 2025 Annual Report to Congress on Dec. 31, revealing that the insurance fund ended the year with a capital ratio of 11.47%, the same as last year’s and well above its statutory minimum requirement of 2%. The HECM portfolio has a standalone capital ratio of 24.06%, down slightly from 24.5% a year ago but roughly 12 times higher than the required ratio.

The report — which was delayed six weeks by the federal government shutdown in the fall — provides expanded disclosures on the HECM program. New View Advisors wrote that “the report contains not only good news about the solvency and financial strength of the MMIF, but it is also the most complete and informative MMIF report to date.”

New View Advisors said the new data supports industry responses to a recent U.S. Department of Housing and Urban Development (HUD) request for information that questioned multiple aspects of the HECM and HECM Mortgage-Backed Securities (HMBS) programs.

New View pointed out that the FHA continues to record negative Claim Type II losses on HECMs, meaning that the agency ended up with a net gain in this area.

“As was the case last year, FHA’s HECM Claim Type II loss is negative; in other words, FHA is making a profit on its HECM claims. Is this an insurance fund or a hedge fund?” New View asked.

The losses that do exist are small, the commentary points out. Claim Type I and supplemental claim losses totaled about $241 million in fiscal year 2025, down from more than $300 million a year earlier. Losses represented about 0.38% of the $64 billion in HECM insurance-in-force, less than the program’s 0.5% annual mortgage insurance premium.

The report shows no material losses on HECMs originated after fiscal year 2017, according to the commentary.

New View also highlighted strong performance in the FHA’s Secretary’s Notes portfolio, which consists of HECM loans assigned to HUD when balances reach 98% of the maximum claim amount. The portfolio has an estimated value $49 billion.

Despite the positive financial news for the HECM program, New View Advisors said that structural issues continue to suppress demand for the product, with data showing limited interest in term and tenure HECM product options.

Fixed-rate HECMs accounted for only 0.14% of market share in fiscal year 2025, a result the authors attributed to FHA policies that steer borrowers toward adjustable-rate products. And the upfront mortgage insurance premium, which is 2% of the maximum claim amount, “can exceed $20,000,” which New View Advisors describes as “a non-starter for many potential borrowers.”

HECM insurance-in-force declined for a third consecutive year to $64 billion, about 12% below its 2017 peak, as liquidations continue to outpace new originations. At current production levels, the authors estimate the total could fall below $40 billion within a decade.