MAYBE THE CONSUMER FINANCIAL PROTECTION AGENCY IS THE ANSWER THE HECM REVERSE MORTGAGE INDUSTRY NEEDS

With the passage of the reverse mortgage amendment (to HR 4173) in the House of Representatives, the possibility exists that the Consumer Financial Protection Agency will have oversight over the reverse mortgage industry.

In the past, I have suggested that the industry needs a new kind of oversight. The counterintuitive notion of a reverse mortgage “czar” overseeing the industry could be a good thing. Consider this: The reverse mortgage industry has been in existence for twenty years. Yet the industry has not been able to shake the ubiquitous misconceptions that continue to debase our business.

The media still distorts the facts and the efficacy of the program; the politicians, not knowing better, still seek to protect “parents and grandparents from being cheated and mislead.”  Even though Congress passed the “SAFE” Act and the Housing & Economic Recovery Act, and the president signed these bills into law, Washington still feels that our elders are still not adequately protected.

Yes, it is hard to understand how one can say, as Rep. Titus stated, that the “amendment protects seniors from unfair and unclear financial products and….. excessive fees”. If this bill passes the senate and is signed into law, the director of CFPA will have some amorphous power to protect reverse mortgage borrowers under consumer protection laws and HUD regulations.  While the power of the director may not be crystal clear, it could serve as the clarion, stentorian voice that once and for declares that the product is safe and all eligible seniors should be encouraged to obtain one.

After twenty years, the congress still does not get it that usually 50 per-cent of the fees are due to HUD’s own mortgage insurance premium requirement. HERA has already limited and capped origination fees.  HUD’s twenty years of rule-making have not lead the industry to the promise land. Clearly with the new emphasis on risk management, it is obvious that it never will. This industry may set a record for the length of time it has maintained a 1- 2 percent market penetration.

If the purpose of the CFPA is to herald the reverse mortgage program as safe, and to concomitantly encourage its use, the paradox of additional governmental oversight being the answer may be correct. Then of course the key question must be asked. Does a zebra ever change its stripes?

 

Comments

[Fred Lee]

I find it interesting that the FHA is proposing rules to eliminate the need for brokers to be approved to sell RMs and other FHA products. Strange that the government is deregulating this part of the mortgage industry at this particular time.

[Tom Degan]

Don't hold your breath waiting for whole chapters to be written about HR 4173 in the history books. The Civil Rights Act of 1964 it ain't. This proposed new law is so riddled with loopholes it might as well be rendered next-to-useless. It was passed 223 to 202 - with not one Republican legislator voting in favor of it. Not one. Even a law as watered down as this one is unacceptable to these fools. That fact alone illustrates more than any other the moral bankruptcy of that hideous party.

HR 4173 is merely a baby step in the right direction. For three long decades these knuckleheads were permitted - by law - to run roughshod over our economy, looting our national treasure in the process. As Sam Cooke once sang, "a change is gonna come". So much more needs to be done. So many old laws need to be re-instituted. Imagine cleaning up a blood bath with a Kleenex. That is basically what HR 4173 amounts to.

http://www.tomdegan.blogspot.com

Tom Degan
Goshen, NY