Does FHA Mod Hit or Miss its Intended Target? Part 1

This post will focus upon those areas where I feel the law hits the bulls-eye. A succeeding post will discuss where the law misses the target altogether.

It hits the bulls-eye by eliminating the HECM Advisor program. The HECM Advisor program was an ill conceived program that had nothing but good intentions. Back in 2000 only 6600 HECM loans were closed. HUD wanted to increase this amount. The thinking was to allow non FHA entities to market the program and get paid for doing so.  Through the years many questions were raised regarding how one can adhere to HUD’s policy without violating a long established rule of law. 

The inherent concept of this program contravened a long establish rule in the mortgage industry, To Wit: One  cannot get paid for a mere referral. (Section 8 of RESPA-Real Estate Settlement Procedure Act).   I invite you to read Mortgagee Letter 2008-14. It lists activities that an approved FHA entity must do  and activities that must be done by a non approved entity. It tries to take an immutable concept and mold it into something that it cannot be molded into.

Sadly, in a civilized society the majority of honest and caring professionals have to suffer for the misdeeds of a few. While the selling of annuities and other financial products have been abused by a few greedy individuals , the prohibition against the selling of same by a company selling reverse mortgages also hits the mark. This industry cannot afford negative press of the kind we saw in the New York Times (March 2, 2008) and on the Nightly News with Brian Williams (Jan 10, 2008). While I agree that annuities can serve a solid financial planning purpose, the wholesale proscription of same will help eliminate  the miscreants  in the financial sector that were preying upon our elders. The insurance companies that recently purchased reverse mortgage entities will no doubt try to modify these provisions.

The law also hits the mark for capping the origination fee at $6,000 at the high end. I  believe that this will force "bad companies" out of the industry. These companies typically came in with slick promotions and misleading marketing campaigns thinking that seniors are pushovers  and  conquering  this industry would be an easy task. Sadly, some good companies may be forced to leave as well because profit margins got razor thin.

While the loan limits, as of this writing, are in a state of uncertainty, the limits will be going up. The only question that remains is by how much? The specter of higher loan limits is wonderful news for our seniors. Also having a HECM program for the purchase of a home (until now this was limited to the more conservative Homekeeper program) and for cooperative apartments is huge.

Many of these changes took years to accomplish.  Our elders are clearly the winners.

Comments

[lucas law center]

Thanks for sharing. I'll be sure to pass this along to other L.O.'s in my company.
It's always great to see people share what works for them, even if you get something out of it!

LLC

[Lance Jackson]

Your comments are right on. Thanks.

[David van der Werff]

Dennis, I read your posts regularly, and am so happy you take the time to spell things out in a clear, concise, easy-to-understand manner. I sincerely value your input and thoughts, and wish more folks were exposed to your writings. You wouldn't (well, maybe you would) believe some of the blogs about reverse mortgages, and how "bad" they are, and that they are the cause of the current mortgage meltdown. Is laughable, but not really, these people truly believe that, and I believe it is because of ignorance. Keep up the great work, and much success to finishing this year srong by helping out more folks looking to work with honest, caring professionals like yourself!