The HECM Reverse Mortgage Industry Continues To Adapt To Whatever Washington Dishes Out

Once upon a time there was a great industry that took great pride in providing a better way for our elders to continue to live in their homes. The overriding focus and concern was to insure that the borrower received the appropriate loan in a very timely manner. Yes, there was a time when the industry was the slave to the needs of those it served. And yes, those halcyon days felt good because we did good, real good.

Now our industry has changed, as it has become the slave to governmental laws, rules and regulations. Focusing on serving the needs of our clients is now out of focus. It is as if the industry has taken on a familiar symptom of decrepitude confronting our clients who suffer from glaucoma, cataracts and macular degeneration. Abiding by these laws and policies has displaced the need to treat the cohort we serve in the way we have done so in the past. Today, it has become so difficult to set the proper expectations and to properly be of service to those that need our help.

Perhaps you have heard about the apocryphal “frog boiling in water” story. This story represents the quintessential nature of our industry. If a frog is placed in a pot of boiling water it will naturally jump out. However, if one were to place the frog in a pot of water at room temperature, it will remain. Now, if you were to slowly increase the temperature, the frog, as the story goes, will acclimate to the rising temperature of the hotter water. As you continue to increase the temperature of the water, the poor critter will eventually boil to death. This illustrates the concept of adaptation. Adaptation is what this industry excels at.

There is an inherent disconnect how government looks at a problem and how those on the front lines in our industry views the same problem. Joseph Stalin and Mother Teresa, believe it or not, shared a belief. Stalin once said, “One man’s death is a tragedy, but a million deaths is a statistic.” Mother Teresa voiced a similar sentiment when she said, “If I look at the mass, I will never act. If I look at one I will.” Government looks at the masses, at the statistics and places all individuals, with differing needs into the same category. Those who serve our cohorts, see the individual suffering, and say “why”. Some in our industry take a close up view and see the hardship that government causes with its draconian laws and rules. Government only sees numbers and statistics. It doesn't see people.

 Accordingly, once government promulgates a solution to a problem it is usually not willing to consider a better solution than the one it proposed, nor is it generally willing to listen to compelling reasons to change its position. Government becomes married to its original position.

A visionary leader is always thinking big, thinking new and thinking ahead and has incredible insight so that he can see things that others cannot see. This kind of leadership once imbued our industry. It has been replaced with a paralysis that stems from fear that only leviathan governmental agencies can instill.

Some may think that the government supports this program because we have been showered with exulted paeans by the HUD and FHA Secretaries supporting the program. I believe that the speakers believe those words of support that they utter. With all due respect, these words in support are just words: words without feeling or consequence. It’s like talking about cancer. After awhile you get numb to the word. Cancer, cancer, cancer, cancer, cancer, until you don’t hear it anymore; except if it’s your cancer that is eating away at your body. 

 And the industry believes that Washington supports the program. The following examples will  provide a close-up perspective on the carcinogenic effect policy is having on the lives of the elderly.

So tell the woman who can no longer obtain a reverse mortgage (because the program benefit cuts prevent her from getting rid of her conventional mortgage that she could never have afforded to begin with)-that Washington supports the program;

Tell the man whose last financial hope hinged upon getting the reverse mortgage that he was turned down because HUD has threatened not to insure loans with a properly executed power of attorney (even if executed under the guidance of an attorney) because underwriting guidelines insist on using artificial standards that prefer guardianship proceedings to a validly executed form- that Washington supports the program;

Tell the war hero who gave his all for his country that in his time of monetary need, his appraisal came in low because the appraisal management company chose an inexperienced appraiser-that Washington supports the program;

 Tell the grandmother who has fallen on hard times  and who needs every dime that can be squeezed out of the reverse mortgage, that the benefits will  once again be reduced because Congress won’t provide the needed subsidy-that Washington supports the program.

Tell the family who can no longer pay the expenses for keeping their competent parent in the home, that their loved one will not be able to satisfy the testing requirement of the new counseling protocol because of her short term memory loss, and will be specifically excluded from the program because counselors are precluded from issuing a counseling certificate- that the Government supports the program. 

When Will Rogers said, “Things can’t go on like this, and they didn’t, they got worse”, who knew that he was talking about the reverse mortgage industry.

Instead of piling on rule after rule, Washington (and the states) needs to consider what they want the end result to be. If the agencies insist on piling on the regulation this industry will be left with a niche product.  Talk about crimes. At a time when more people need the program; at a time when more people are eligible for the program, the government has the temerity to make the program harder to access. To those practicing political demagoguery, back off. It is time that this industry fights back. No one I know got here because we were satisfied with a niche product. After 21 years, this program deserves to be mainstream. Sadly it will never be if things do not change now.

Once again, I end with the story of the wise old man and the smart –aleck kid who wanted to make a fool of the wise old man. Here is what the kid wanted to do. He, the kid captured a bird in the forest and he wanted to go up to the old man and say, “What have I got in my hand”? And the old man would reply, “You have a bird in your hand”. “Is it alive or dead”, the kid would say. The old man knew that if he said, “dead” The kid would let the bird fly away. On the other hand if the old man said “alive”, the kid would kill it and say, “It is dead”.

And so the kid actually went up to the old man and said, “What’s in my hand old man?” and the old man replied, it’s a bird.” Is it alive or dead old man?” And the old man replied, “The bird is in your hands, you have the power.”
And like the smart aleck kid, Washington is holding something very precious in its hands.   Washington has the power……………………..and the reverse mortgage industry also has the power…the bird is also in your hands.

 

Comments

[Aaron]

Typically, when a reverse mortgage is concerned, especially one offered by the Federal Housing Administration, a homeowner must go through a counseling session which will make them aware of any difficulties which may arise from a reverse mortgage and also point out requirements that must be met before a homeowner can successfully obtain a reverse home loan. This is beneficial in that homeowners have been able to find alternatives to a reverse mortgage which may help them find financial relief without the risk which sometimes is associated with a reverse mortgage loan. Thanks for the post!

[Sandra]

I believe that this issue is resolved through the secretary delegating the approval process to the sponsoring mortgagee.

[don]

You are right on. I am extremely frustrated with these lawmakers who sit up in DC and think they know whats best for everyone. Just as you said they rule the masses rather than putting the individuals needs first. I have recently had two seniors who couldn't get a Reverse Mortgage because of value issues and in both cases the values needed were in line with the areas but the appraisals were very poor quality and came in low. Both are now in danger of loosing their homes to foreclosure because they cant continue to make their payments.

[Jim Haake]

Dennis, as always an accurate account of mess we are in. Since 2003 its been a great product, now its a shell and more pain is on the way. So one door closes and another opens.

Thank again for your educational letters.

[Bob Irving]

Thank you, Dennis, for 2 more great posts. In my opinion, the Financial Interview Tool and the Benefits Check Up are the 2 worst decisions made since the HECM program was implemented. Seniors are already overwhelmed with the paperwork upon applying for the program... and now they will be both overwhelmed and turned off by the "counseling". After 600 or more reverse mortgage originations I am saddened to watch this industry implode. Thank you for doing your part to try to stop this madness. More should speak up!