The HUD HECM Reverse Mortgage: Policy Reigns Over Reason

The Reverse Mortgage Industry is facing an immediate sea of troubles. It is like a canoe on a river that is trying to steer an erratic path in an effort to stay afloat. The question remains, as the dark of night conflates into the dawn of a new day, whether the battles with these implacable untamed currents, will cause the canoe to finally capsize, break-up and plunge to its final precarious destination.

The above paragraph is an ample metaphor for the direction of this industry. The “implacable untamed currents” refer directly to the reverse mortgage edicts that are coming out of Washington. As long as this  industry remains relatively silent, and accepts things as they are, these currents will capsize the industry.

Just as HUD has effectively ignored the provision in  HERA (Housing & Economic Recovery Act 2008) that permits HECM’s to be used for  co-op units, it has also assaulted the sacred territory of condominiums as well. Their draconian guidelines (Mortgagee Letter 2009-19) makes it expensive and troublesome for a lender to due spot condo approvals. The result: As of November 2, 2009 condos will be effectively excluded from the reverse mortgage program or the time to the appropriate vetting will be indeterminately long.

The Reverse Mortgage industry is “people directed”.  Those in it are not suppose to be working “operating room” style-sterile. Yet this is what we are forced to do. There are legitimate, warm and friendly commitments that are made with families by originating individuals. In many instances the family depends on these individuals. Many originators  have acted altruistically accomplishing chores, etc. for the family  at the originator’s expense; there are professional relationships between appraisers and Banks, mortgage bankers and mortgage brokers that have existed in the mortgage industry for 30 and 40 years; there are counselors that would call originators with questions. And originators that would call counselors with questions.  Everyone wanted to be better at their craft. Yet each of these relationships are now considered dirty, corrupt and lethal.

While the mortgage industry does have its share of miscreants, as does every industry, rules and laws that take the human interaction out will also suck the life out of that industry. There are plenty of laws on the books that permit regulators to eliminate the bad apples. Sadly they are conveniently ignored. Politicians and regulators get more political mileage if they can point at new laws, and new regulations that “we are using to protect you now”.

If one were to take current and prospective regulations into account the following  is a composite of  what  Reverse Mortgage industry would  look like:  The originator, will not be able to help seniors who are otherwise eligible, that live in co-ops or condominiums; An originator is not permitted to answer a “where should I go to get the counseling done”  question or other reverse mortgage questions.  An appraiser will do an appraisal in an area that they are not familiar with, thereby causing values to come in below market value and not at market value. An individual who obtains counseling will soon be tested and can be denied  access to the program. Underwriters will be the ultimate deciding factor as to whether the principal was of sound mind when a power of attorney was executed. The result will be totally nonsensical. To wit: A  power of attorney will be appropriately accepted by others, for all things EXCEPT for getting a reverse mortgage.

I hope I am wrong about the long view. However, I firmly believe that there is a way to affect the right kind of changes that will demonstratively protect seniors . At the same time it is important that Washington and the states  see that a framework is in place that preclude malevolent forces from taking  advantage of this cohort.

Comments

[ReverseMortgageGal]

I'm a LO and do RM's all over California, you are absolutely spot on Dennis with your up to the moment assessment of the status of the industry and this product. The media assault really got heavy 3 or 4 months ago, I keep asking myself where are are these lenders and loan officers that supposedly need regulation in the HECM industry? Everyone in the industry I work with throughout California is honest, we work with seniors because we enjoy helping them, smiles of joy with the burden of monthly mortgage payments removed, and/or the addition of a cash account to stop the worrying at night over "what if"...the roof leaks, or I need in home care or my car breaks down. There is a larger reason for this assault on the product in my opinion, I'm just not clear on what it is..yet.

[Reverse Mortgage Lender]

Hi

Great knowledge about mortgage and real estate.