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.
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