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Financial Assessment And Reverse Mortgage Borrowers
The Future Of The Reverse Mortgage Industry
Some claim that Financial Assessment has created confusion in the marketplace. Others fear it will exclude up to 30% of borrowers. As the debate continues, the Financial Assessment is the biggest game-changer that the reverse mortgage industry, and our future borrowers face.
It’s a game-changer and lenders are waiting for HUD to issue specifics. Watch the video above to see what lenders are saying.
6 Comments
The problem was not the shock of financial assessment but rather the effect of that shock and how quickly and how well the response was. As soon as the first lender moved to adopt financial assessment, the vast majority in the industry who were negatively impacted by it just seemed to sit, wait it out, and enter into that most American of pastimes, complain.
Perhaps nothing says it better than Jeff Taylor’s recognition that for the last three plus years we have been “making tomorrow’s foreclosure today.” This is not good for borrowers or the industry.
HUD needs to come in right away. It is a real shame that it is taking as long as it is. Over 5 years over, one industry leader came to me asking me if I knew the family secret. At that time the size of HECMs in default was promoted as less than 1% of the outstanding HECMs. Now it is believed to be nine to ten times that percentage. Are we any closer to seeing a reasonable solution being implemented than we were five years ago?
Right now our industry seems to be lost in polarization. As the second lender gathered ideas from its wholesale customers, some in the industry rose up to tell that lender that mandatory escrow accounts should be used. Yet they had not heard the cries that mandatory escrow accounts were not permitted by HUD weeks and weeks before. It is a shame that those who are the most vocal seem to fail to do their homework. Perhaps one of the most interesting reactions was by an alleged counselor who declared in dismay: “How can anyone call an idea unreliable when it has yet to be proven either way?” Of course if reliable means results are dependable then how can something which has no track record be reliable?
While the NRMLA approach may be best in the minds of many that does not mean it cannot be improved. Like any situation where there is strong polarization, few are in the middle trying to take the best of the different positions. Later this week, I hope to provide an alternative which is more comprehensive than either approach so far but whose foundation stands firmly on the NRMLA approach.
The mortgage business always reacts instead of being pro actived (which is what metlife life was doing)… We have swung the pendulum from one extreme to the other….The mortgage business is a risked based business. we cannot or expect to thave zero percent defaults…it will never happen, no matter what type of FA’s are in place. We should be looking at the 94% of Rms’ that are not in default and how they have helped seniors. If real esate values stopped going down , we wouldnt even being discussing these defaults!
Mike,
We are probably much closer to 10% defaults than 6%.
I understand looking out for the Senior but again this is overkill from Washington. Are you aware that the deliquency rate of traditional loans is nearly 16%? I would say that the reverse is doing quite well compared to the rest of society.
Overkill,
Do you understand what is at risk? Lenders must cover the loss, if any, from these defaults. Neither GNMA nor HUD will. Further, it is not just the losses but also the liquidity requirements such defaults will place on servicers and lenders.
Financial assessment underwriting is not being demanded by Washington. Where do you get that from? LENDERS want it.
Wells Fargo Bank left our industry over this issue. Washington did not kick Wells out of the industry. Wells left voluntarily because it grew tired of all the promises that were being made about what financial assessment underwriting will be without any change in HUD policy.