HUD is auctioning off 1,600 HECMs — with more to come

The U.S. Department of Housing and Urban Development (HUD) is cleaning up its books and auctioning off roughly $444 million in reverse mortgages on Wednesday to reduce the risk to its Mutual Mortgage Insurance (MMI) Fund.

The sale includes about 1,600 Home Equity Conversion Mortgages (HECMs) tied to vacant single-family homes where the borrowers are deceased and no surviving spouse remains, according to an Aug. 1 notice in the Federal Register.

The auction is the first of two planned offerings. HUD expects to hold a second sale in September with roughly 2,000 more loans totaling $548 million.

“These initiatives support HUD’s continued efforts to reduce financial risk to the Mutual Mortgage Insurance Fund and promote the efficient disposition of defaulted assets,” the agency said in its notice.

HUD has not said how it will use the proceeds from the HECM loan sale, although they will likely return to the MMI Fund. The department did not immediately respond to HousingWire‘s request for comment.

Nonprofits, local governments and private firms can bid on the HECM offerings, while anyone barred from doing business with HUD is excluded. The department said it will select bids that offer “the best value to HUD.”

Winning bidders must submit a deposit based on the total value of their award. The deposit, due within the timeline outlined in the bid confirmation, will be credited toward the final sale price at settlement.

HUD’s MMI Fund — which backs all Federal Housing Administration (FHA)-insured loans, currently has a strong capital reserve ratio of 11.5% as of September 2024. The ratio, which is more than five times higher than the statutory minimum figure of 2%, puts HUD in a strong position to sell loans without needing to shore up its balance sheet immediately.

The fund’s strength could be tested by borrower defaults or economic shifts. Selling off these riskier assets now reduces future volatility.

But HUD’s official 2026 budget justifications to Congress provide very little detail about HECM serialization, performance or policy changes, signaling a possible shift by HUD’s program priorities away from reverse mortgages.

The budget included a request for $160 million to help fund servicing and claims processing for MMI Fund programs, including HECMs. The budget documents showed that, as of June 2025, HECMs are profitable and growing.

“Total loan volume projected for all MMI programs for 2026 is $315.1 billion. Of that total, $300 billion is estimated for standard forward mortgages and $15.1 billion is for HECM,” the document reads.