by Peter Bell
The annual release of the President's budget is political new year's day in Washington. It triggers the beginning of a whole new cycle of negotiation, advocacy, relief to some and disappointment to others.
A budget is not just a set of numbers; it's a philosophy. It's the government's approach to the coming fiscal year, a set of priorities as well as of lesser concerns.
For those of us in the reverse mortgage business, the news in this week's release of President Obama's FY2013 budget (which covers expenditures from October 1, 2012 through September 30, 2013) was good. There are two primary numbers in the current HUD budget structure that are most significant to us: one is the projection for the Mutual Mortgage Insurance fund and the other is the money for counseling.
Since the HECM program is by statute required to be net neutral annually, each year we need an evaluation from the Office of Management and Budget (the President's budgeting office) that projects the HECM portion of the MMI fund will not lose money and need an appropriation. If an appropriation were required from Congress in this deficit-obsessed environment, the future of the HECM program would be extremely vulnerable. But the new budget scores the HECM program at -0.921, and though that looks negative, in Washington-speak it means the fund's revenue is expected to be positive and support is unnecessary.
As for counseling, the FY 2013 budget asks for $55 million, about ten per cent of which usually goes towards the HECM program. That's a $10 million or 22% hike over the proposed FY 2012 counseling budget.
The release of the President's budget is just a table setter. It kicks off a long, complicated and politically-charged process. Were the House of Representatives controlled by the President's party, it would take the President's budget and work from it. But with the opposition in control, it appears as if the Republicans plan to pass a budget of their own. With two different budgets (or philosophies) on the table in an election year, what is the Democratic controlled Senate to do? Republican voices claim Senate Majority Leader Harry Reid has already told them he won't even try to pass a budget until after the 2012 election.
When a budget is in limbo, the vehicle for assuring continuing operation of the government is generally a Continuing Resolution (CR). Since no FY 2012 budget has been passed, we are now operating via a CR that runs through the end of this fiscal (September 30). Under a CR, programs continue at budget levels from the last passed budget.
So what does this mean for our industry for the rest of the year? That business can continue as is without us having to fight for an appropiation or to preserve the loan limits or maintain the current MIP premium. And so we can devote our time to expanding consumer knowledge of and demand for reverse mortgages.
For information about the National Reverse Mortgage Lenders Association, click here.
