Last week we saw the best from an industry. When attacked one must answer in kind. When wrongly vilified, one must use the power of words. In either case, a rapid response is essential.
The problem started when John Duggan, the Comptroller of the Currency, compared subprime mortgages to reverse mortgages. His comments first appeared in the WSJ. It then spread like wild fire throughout the media. As reported, the comments suggested that reverse mortgages posed substantial risks that appear to mirror those already seen in the subprime arena. The industry answered with the right degree of constraint.
Jeffrey Lewis, Chairman of Generation Mortgage, appearing on CNBC, gave clear, concise and laser pointed answers. These answers provided even the uninitiated with solace that another mortgage meltdown was not in the offing. In addition, Mr. Lewis stated that the industry has been around for 20 years; an arm of the government is insuring these loans; AARP in a recent study determined that 97% of seniors were satisfied with their reverse mortgage. Wen reverse mortgage volume is compared to total mortgage volume, reverse mortgages represent half of one percent of this amount.
The Florida elder law attorney that appeared in the same segment wants us to believe that the government will have to continuously bail out the program. Once the housing market corrects itself, the government will not have to be concerned with this.
Her comments were also inscrutable. While recognizing that seniors have lost a significant part of their nest egg, health care costs are going up and seniors are losing health care coverage, she couldn’t even acknowledge that a reverse mortgage, in the appropriate circumstances, could be a good thing.
NRMLA, through Peter Bell, crafted a response to the Wall Street Journal. I like the statement, “The only thing the two products share is the word ‘mortgage’”. The response then focuses upon the multiple layers of protection that seniors enjoy under the reverse mortgage program. To wit: mandatory counseling, FHA insurance, restrictions on cross selling and origination fee caps. In addition to this NRMLA members are required to abide by a code of ethics.
In accordance with this response, it was pointed out that the consumer complaint offices of the Federal Reserve, Office of the Comptroller of the Currency, Office of Thrift Supervision and The Federal Deposit Insurance Corp have not received complaints from seniors.
It is time that a clarion call, hailing the soundness of the reverse mortgage program be heard throughout the land. And to elected officials and to regulators everywhere, please note that there is no symbiotic relationship between reverse mortgages and subprime loans. They should not even be mentioned in the same breadth. As Peter Bell said in his retort to the WSJ, “The only thing the two products share is the word ‘mortgage’”.
No question about it, "mortgage" is all they have in common.
Posted by: James E. Veale, CPA, MBT | June 27, 2009 at 11:36 PM