Does FHA Mod Hit or Miss its Intended Target? Part2

The discussion as in Part 1, will center around the changes concerning the HECM program.  Part 1 focused upon those bulls-eyes that FHA Mod hit. Part 2 will focus upon the misses.

The new law prohibits a lender from paying for counseling and requires the establishment of a new counseling protocol. I do think that lender paid counseling is fine provided that the funds are paid to the corporate entity which has a network of national counselors that are focused upon doing their job of counseling. The issue becomes more problematic when a lender remits to one  single agency that would then counsel a senior. 

Additionally HUD has spent a great deal of time on the counseling issue as noted in the following mortgagee letters: 2000-10, 2004-25,2004- 48,2007-08 and 2008-12. In the last mortgagee letter, HUD spells out the 3 permissible ways counseling can be paid.  FHA Mod changes this. Under no circumstances can counseling be paid by a lender. While taking away the appearance of impropriety is a good thing, it forces seniors to pay for counseling out of their own pockets. This new mortgagee letter should allow seniors to pay out of the proceeds of the reverse mortgage, or if they decide not to get one or can’t close on one, then HUD would have to pay the counseling agency.

Closing costs are a main concern to all. In fact, this issue is the main reason why seniors do not proceed with their reverse mortgage. I believe that this study regarding the effect of the mortgage insurance premium should have been sanctioned a long time ago and the results should have been factored into FHA Mod to signal to everyone that closing costs are in fact going down. It is an anomaly to cap origination fees while the MIP fee increases.  The overall result is that the total closing costs will be increasing rather than decreasing.

This gives those in the media  ammunition to renew their lopsided and misguided attacks upon the program. While government and industry often have different viewpoints and competing interests, here I would like to think that we are on the same page when it comes to fees.

Having just written the above, I am reminded of the fact that the government places the MIP fee funds into the general fund. So perhaps the interests are not the same.  Perhaps it is time for some of those proprietary programs to fill the void………if only the somnolent secondary market would wake up.

Comments

[Lance Jackson]

Again, your comments are excellent.