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42 WHAT'S IN STORE FOR HECMs? An Urban Institute blog post posed an intriguing question: should the Federal Housing Administration (FHA) remove Home Equity Conversion Mortgages (HECMs)—reverse mortgages—from the agency's Mutual Mortgage Insurance (MMI) Fund? e MMI Fund provides insurance for two programs: a forward mortgage program and the HECM (reverse) program. According to a November report to Congress on the MMI fund, the report shows that the MMI Fund supports $1.23 trillion of insurance-in-force and had a capital rate of 2.09 percent. e numbers for the two different mortgage programs are very different, however. As reported by Urban Institute, the forward program supports "$1.15 trillion in current insurance-in-force (8 million mortgages), [has] a capital ratio of 3.33 percent, and an economic net worth of $38.4 billion." On the other hand, the HECM program numbers break down to $73 billion in current insurance-in-force (413,000 mortgages), a capital ratio of -19.84 percent, and an economic net worth of -$14.5 billion. As the Urban Institute's post explained, "e forward program, with 93.5 percent of the total insurance-in-force, has a capital ratio well over the statutory minimum. e reverse program, with 6.5 percent of the total insurance-in-force, shows the opposite, and its volatility makes it difficult to model. is puts the dependability of the reverse mortgage estimate in doubt." Urban Institute's post points out that it's very difficult to estimate the performance of the reverse mortgage program. Between 2012 and 2017, the capital ratio for the HECM program has varied wildly, ranging anywhere from -19.84 percent to 3.07 percent, and has shown year-to-year variations of 8 to 14 percent. On the other hand, the forward program's capital ratio has only varied between -1.34 percent and 3.33 percent. Calling HECMs volatile by comparison seems like a bit of an understatement. CONVERTED MALLS COULD PROVIDE ALTERNATIVE HOUSING SOLUTION According to a June 2017 report by Credit Suisse, as many as 25 percent of America's malls will shuttered by 2022. at's a lot of empty real estate, but also real estate that doesn't easily lend itself to reuse. After all, no matter what you do to a mall, it's hard to disguise the fact that it used to be a mall. One possible solution? Repurpose those empty retail spaces for residential use. With more shoppers embracing online shopping every year—Credit Suisse predicts online shopping will account for 35 percent on consumer spending by 2030—the great American mall likely isn't going to come back to life anytime soon. Meanwhile, communities around the country are facing inventory shortages in the housing market. According to an October RE/MAX National Housing Report, September 2017's supply of inventory was the lowest of any September in the report's history. A Forbes piece poses a unique solution to the problem: why not turn that abandoned mall retail space into places for people to live? "Residential housing is one of the several options that developers are considering in order to revitalize failing mall properties," said Rick Rizzuto, VP at Transwestern. "In today's landscape, some are redeveloping mall properties to include residential units, while others are considering condos and apartments." Converting mall properties into apartments and condos could provide outside-the-box solutions to housing shortages, as well as revitalizing some part of the mall's original purpose—the convenience of having a variety of stores in one location. Many consumers might not want to drive to the mall to do their shopping when Amazon is only a click away, but when there are an array of stores literally right outside your door? at could be a different story. As Steven Henenfeld, SVP and Director of Retail Leasing at CREC, explained, "One of the main benefits is that residents will have restaurants, services, and retail at their front door step. e close proximity to these uses will allow the consumer to utilize these almost as amenities." at level of convenience would likely appeal to two crucial demographics: aging baby boomers and millennials looking for more affordable alternatives to traditional homeownership. Malls also offer another benefit when it comes to use as housing: location, location, location. "Malls are typically located on or near an intersection of a high or a main street and are well served by public transportation," Henenfeld said. "at puts the residential properties at the center of town, allowing residents easy access to main roads and highway systems." However, that conversion process wouldn't be as simple as just remodeling the interiors. Jay Rollins, Managing Principal of JCR Capital, said, "It typically requires a partnership with local municipalities and other officials to obtain proper zoning and determine a site plan." Peter Muoio, Chief Economist at Ten-X, added, "Retail and housing require completely different skill sets. You are dealing with numerous individuals instead of fewer corporate clients. Leases are shorter and turnover tends to be higher for residential. However, there's an incredible demand for housing, especially in certain markets, so owners making this shift would be entering a growth arena."

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