There are 1375 rules that the HECM Reverse Mortgage Industry must follow-Well it Seems Like there are that many

In the NY Times editorial the other day(1/17/10), the  editorial writers  otherwise known as  those “wise repositories of knowledge” illustrated abject ignorance when it came to the concept of reverse mortgages. Lately commentators, when writing about this topic, seem to misplace their thinking caps.

 

The editorial suggested that while reverse mortgages have been used to increase income (their words, not mine-cash flow would have been a better word) reverse mortgages are nevertheless undermining the wealth of older Americans. I can’t put my arms around this particular thought because the program is enabling older Americans to lead  better lives. (A great thing)  I cannot understand how this same program is undermining the wealth of older Americans.  Maybe someone else can figure out this folderol. I admit I cannot.

 

On the reverse mortgage issue, the editorial concludes with the point that seniors are vulnerable and that regulators need to be even more vigilant. Even after acknowledging that the reverse mortgage is a government insured loan, I found it interesting that the editorial still mentions the need for additional vigilance.  The point is that there is a lot of oversight now. How much is there? Funny you should ask.

 

I decided to do a quick perfunctory check on the nature of and quantity of governmental supervision of the program.  Governmental oversight includes state and federal oversight.  For example in the state of New York, one would have to peruse the banking regulations and sections 280 and 280a of the Real Property law. A separate file on my desk contains what I consider to be important mortgage letters. I found a total of 25. A mortgagee letter contains rules promulgated by the Secretary of Housing and Urban Development. These rules regulate the HECM reverse mortgage program. Remember these are just the ones I consider important. That means there are a multitude of others regulating some component of the program.  

 

For additional proscriptions check the HUD Handbook (4235.1 Rev 1). I would also examine The National Housing Act (12USC§1715-20a). This section tells you why the program was created and the concomitant needs that it was intended to meet. Also check out the Federal Register to read about the HECM rules (Federal Register-Title 24 part 206). Then when you are done, do not forget to review the FHA Modernization Act which was part of the Housing and Economic Recovery Act (2008) which sets forth key concepts and protections. Also lenders have developed some underwriting guidelines that are stricter than HUD’s rules so review be mindful of them as well (5:1 counseling ratio morphed into an eligibility requirement and  the non borrowing spouse counseling requirement is stricter than HUD’s requirement).

\

Your search would not be complete without examining the new Home Valuation Code of Conduct which is couched as a protection device but does anything but. And finally you may want to briefly review the new counseling protocol that will be required in a couple of months along with RESPA’s new GFE requirements. (This became effective the first of the year). Now I’m sure that I missed some things. This aforementioned list was  quickly compiled. Most was from memory. And there are more regulations and laws to come.

 

When this country was first settled, the community would take care of the infirm and the elderly. Now fast forward a few hundred years. Government invented a way to help the elderly remain in their homes; remain in the community. The reverse mortgage was that invention. It provided the means to stay in the home.

 

The program isbedeviled by a mountain of new rules, laws and regulations. As the media and our politicians bemoan the fact that there are not enough regulations, the program runs the risk of being smothered to death, under the weighty blanket of redundant and excessive laws.

Comments

[Kathie Adler-Senior Reverse Mortgage Specialist]

Kudos for saying it like it is, Dennis. Hey, you'd think we were making a million bucks for all we have to know and LEARN! Or that we all had law degrees! Forward L/O's should think twice about crossing over!

You forgot just one thing, and it's the new HUD booklet that puts MORE eyestrain on every one of us including our borrowers. On top of the 40-50 page application (with all the needed state dislosures), does HUD really expect anyone to read their new FORTY NINE page Settlement Cost Booklet? Imagine the cost of printing applications now! How about 170 pages!! Sure, we understand the effort. Some of the booklet is quite good. But just think of all the GFE webinars that L/O's are going on right now for training on the new GFE. And HUD expects borrowers to read and understand this stuff?

Orwell's book "1984" about poor Winston Smith is apropos, "On each landing, opposite the lift-shaft, the poster with the enormous face gazed from the wall. It was one of those pictures which are so contrived that the eyes follow you about when you move. BIG BROTHER IS WATCHING YOU, the caption beneath it ran . . . Winston roused himself and sat up straighter. He let out a belch. The gin was rising from his stomach . . . His pen had slid voluptuously over the smooth paper, printing in large neat capitals -


DOWN WITH BIG BROTHER!
DOWN WITH BIG BROTHER!
DOWN WITH BIG BROTHER!
DOWN WITH BIG BROTHER!
DOWN WITH BIG BROTHER! ( Part I, Chapter I )

All I can say is: AMEN!!!!!!!

[Paul Garbark]

We need someone to sound a clarion call and get the regulations changed that do nothing but stifle a wonderful program for some senior homeowners. As a loan officer, I feel the need to try to make our legislators understand the roadblocks they have created to stymie many well-intentioned people and needlessly make more difficult what should be a relatively efficient way for seniors to transform their lives by utilizing a reverse mortgage.