The Reverse Mortgage Blog - by Dennis Haber Esq.

The Mortgage Broker and the HECM Reverse Mortgage Program

One key reason that the reverse mortgage program has taken off is because of the tireless work of the mortgage broker. The mortgage debacle that has befallen our country, needs a scapegoat. Some entity needs to be pegged with the primum mobile moniker.  How, in the range of possible perpetrators, can one reasonably narrow the possibilities down to one?  I think that this is rather easy. Think of a long conference table. Along one side of the table sits: The US government, then next to the government sit the government sponsored agencies FANNIE & FREDDIE then the  Wall Street firms then the credit rating agencies, then AIG, then the FDIC banks, then the mortgage bankers and then the mortgage brokers. The US government points to FANNIE & FREDDIE and remarks “It wasn’t us, it was them”.  Then FANNIE & FREDDIE point to the Wall Street firms and utters the same thing. And down the line it goes, until we get to the mortgage brokers. Being at the end of the line, they have no one to point to. Also it should be pointed out that of all these groups, the mortgage brokers have the least power and smallest lobbying budget. So in the “money is power world” of Washington politics the broker takes the hit. This point is rather significant because it is the mortgage broker that has been a key player in the proliferation of the HECM program.

The government, particularly since the Clinton Administration through the Bush Administration believed in the laudable goal of home ownership for all. This aspiration comprised the “American Dream”. The more people that owned homes the better.  However, along the way one abiding principle was forgotten- One earns the right to qualify for a mortgage.  The government used its own cudgel to loosen the “ten commandments” of mortgage lending.  Fannie & Freddie and FHA had to respectively buy and insure these loans. Along the way, the mortgage broker being the last in line, took the hit. The mortgage broker was selling these heretical programs. They were selling them because the wholesale mortgage companies required that they sell them. Along the way the FDIC banks (many were also in the wholesale mortgage banking business) sold them, the mortgage bankers sold them. Wall Street made tens of billions by repackaging these loans and AIG insured the risks. The realtors (seldom mentioned as a contributing factor to the mortgage debacle) throughout the country repeated  the demotic mantra “that real estate values never go down”,  until the hubris of the realtors was proven wrong.

The HVCC will hurt the clients as appraisal management companies hire appraisers who will do the work at a fraction of the cost. Since the management company needs to get paid, appraisal costs will be going up. The appraisals will often be done by appraises who are not familiar with the area in question. Therefore homes will appraise for less. This means that the senior borrowers will receive less. This will act as a further haircut to the principal limit.

Once upon a time, the focus of the HECM program was on getting the deal done. Today the focus is on compliance—rules fostered by well meaning politicians who are not concerned about the resulting  unintended consequences. Who in Washington is standing up for the seniors? Picture the scene in Shakespeare’s Julius Caesar. Instead of the senators physically attacking Caesar, imagine they are attacking the proverbial senior with laws and administrative rulings by appropriate agencies. As the senior is overcome with this perfidy, the stentorian cry echoes off the chamber ceiling, “Et Tu,  Brute”?

 

‘TWAS THE NIGHT BEFORE REVERSE MORTGAGE SETTLEMENT

‘Twas the night before settlement, I thought about Sam
My favorite uncle, was ‘bout to close on his reverse mortgage program.

I compared how easy things were when Aunt Gussie got her HECM money
Years ago things were so different, it’s not even funny.

Back then the government and the industry focused on getting the loan closed
Today its about compliance stuff, and paperwork, and preventing the lender from being hosed.

The reverse mortgage originators care about this group in need,
Today, the lawmakers refuse to believe .

The industry is viewed as a disingenuous bunch,
So laws, rules and regulations are created to protect those who have lost their punch.

But the industry is not full of a bad group of guys and gals
It is full of caring and loving individuals who turn into pals.

There are stories being told all across this great land
So numerous to tell –just count the grains of sand.

You can find these tales in NRMLA’s  December Reverse Mortgage rants
Or in Sam Collins’ book  62 Senior Moments.

Some say the program is bad, it’s sordid and stinks
Can this be true?  I ask with that smile and that wink.

“Gotcha there” you retort with a firm tone of voice
But I remark, “how can this be so when the program is  approved by a 92% choice”.

Look, the program is a baby at 20 years old,
Its future once secured, is unsure as things unfold.

It seems that the government wants to control every itty-bitty piece,
Its grasp around the program is destroying a senior’s comfort and peace.

Lower amounts, constant budget reviews,
HERA’s removal of the program from the General Insurance Funds earns it some boos.

Effectively “eliminating” condos, then co-ops and who knows what is next
Make the underwriting impossible,  are we hurting our elders? Many would say the answer is yes.

Come yea agencies come one and come all , come hither, come now----------------Come  NRMLA, Come AARP, Come FTC, Come OTS,  Come HUD,  Come OCC, Come  OIG, Come FDIC ------- There is alot we can do together to maintain a great program for all to see.

Seniors need our help. The industry is here.
So Let’s work together, there is no time to spare.

Is “over governing” becoming the bane of the reverse mortgage program? The NRMLA conference provides the answer

I would like to make a few post conference observations:  It is important that the states and their regulatory agencies see our industry as an ally and not as the enemy. Working together we can craft laws that offer the ultimate protection while insuring that all eligible seniors have access to the program. In the coming year, I would like to see strong teamwork between the industry and legislators and regulators so that the other is not viewed as the proverbial foe. I am concerned that there will be an exponential quickening of the legislative & regulatory pace particularly after California’s new reverse mortgage bill was signed into law. The phrase “in the best interest of seniors” will remain a mirage as long as input from this industry is ignored.  As regulations and laws seek to provide perfect protections, or tighten-up existing laws, the results can drive lenders out of respective states. We already saw this in Washington.  If the Minnesota law was not vetoed by the governor, the same thing would have occurred there.

Clearly the federal government is caught in the ultimate paradox. While HUD makes the HECM rules through its mortgagee letters, its own Office of the Inspector General seeks to investigate those that follow HUD’s rules and regulations. At the conference, the Inspector General made it abundantly clear that he will investigate any transaction where a full draw was taken. When it was pointed out that the fixed rate program requires a full draw, the Inspector General suggested that it still was an indicator of possible fraud.  Mr. Inspector General please know that we are not the enemy.
 
While condos are on life support per ML 2009-46A, co-ops it seems will be DOA. It is rumored that the mortgage letter is over 100 pages. If this is in fact the case, then this mortgagee letter will be hopelessly inscrutable.  Lenders will have the same reaction to co-ops that they are having to condominiums.  The elimination of another group of eligible seniors from the HECM program will be the unintended consequence of such a mortgagee letter.

The positive news emanating from the conference was that the secondary market wants more of this product. Although the industry will be facing some challenges, I feel that there is a fair amount of product innovation that could be developed.

The underwriting session emphasized that LOs will have to be very particular documenting the file. Nothing can be left to the imagination. Put another way, assumptions cannot be made.  The LO must always provide the answer to the “why” question. For example, if there was a new deed explain why and identify the parties. If some are now deceased, provide a death certificate for each. Your borrower must have always been on title and used the property as their primary residence. You may also be asked for an explanation signed by your borrower and the grantor of the deed, among other things. Welcome to the world of nothing is taken for granted.

As time goes by, there will be a greater need for both the HECM and non HECM programs.  Studies have shown that many older Americans simply are not prepared for the financial challenges of aging. Clearly a fine balance between program governance and origination and closing of same must be maintained. Over- zealous governing will create unnecessary obstacles that will hurt our seniors and rapidly diminish the quality and quantity of people and companies in this great industry.

NRMLA CONFERENCE 2009

A few general words about the conference: The staff at NRMLA is to be commended for providing a top rate symposium that covered germane topics with smart, talented and adroit speakers.

At prior conferences, I could quickly decide which breakout sessions I wanted to attend. However, at this conference choosing the appropriate session became problematic. Since there was only one of me, I could only attend one. Accordingly, I missed great sessions on persuading a bank to accept a short pay-off, language one must avoid when advertising, planning for the condo market, how to get attention for your press releases, and the deals to walk away from.

What is particularly nice about attending such a conference is the opportunity to meet colleagues who I talk with and share emails with but heretofore, haven’t had the pleasure to meet.  It is also wonderful to meet colleagues I never knew existed. And it is great to renew friendships with colleagues I see at these annual and regional events.

Most importantly I attend to learn. I have an insatiable appetite for knowledge. Learning makes me better at my craft.  And it will make you better too. Here is my short list of ten areas I learned something about:
1. Things seniors want in a web site
2. The different faces of elder abuse
3. The secondary markets’ appetite for reverse mortgages
4. Just who are getting reverse mortgages
5. What the future of the industry looks like.
6. Hazards-What the states and federal government are likely to do
7. The new look of counseling
8. Post closing issues that lenders are experiencing
9. Longevity issues
10. Key underwriting issues LOs must be aware of

There were also some extremely controversial statements made. I will discuss these in my next blog post.

So whether it is the regional or national conference, consider attending. It could be the best decision you ever made. Even a dollop of new knowledge, will take you pretty far.

Todays Federal Reserve Decision Will Increase Demand For Reverse Mortgages

The reverse mortgage industry received a dollop of good news in the last couple of weeks.  It looks like the lending limits will remain as they are. This, in my opinion is essential for the continued health of the industry. The industry is effectively held captive by the provisions in HERA that moved the program out of the general insurance fund. Keeping the MCA (Maximum Claim Amount) s as high as possible will increase revenues realized by the upfront MIP (Mortgage Insurance Premium). Unless legislation is enacted to move the program back into GIF, the proceeds generated by the HECM program will have to be re-examined each year.

Current economic circumstances are forcing older Americans to confront an additional layer of uncertainty. The program has already been mutilated by the denizens of doom. These pundits see no redeeming features in a program that has changed hundreds of thousands of lives.  While low rates are good for the mortgage markets, it is not good news for our elders who are trying to maximize return on investments. In addition to this, Social Security will not have a cost of living increase for the next two years.

 The economy is still quite fragile. Accordingly I continue to ask what intractable “black swan” events are lurking out in the ether.  Even if our economy is spared another calamity, the reverse mortgage program still remains the safest and best way for an appropriate eligible senior who has already made the decision to remain in their home, to access equity.

It is also important to know that notwithstanding the staged and disingenuous actions of certain politicians, the program has a staunch supporter in Congressman Barney Frank, one of the most powerful members of congress..  The balance of 2009 and 2010 will also be the time when the entire industry  will have to make its collective voices heard. As long as voices are not heard, lawmakers and regulators will assume that the industry agrees with the actions taken.