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Changes in CFPB Regulation
The Evolution Of The Reverse Mortgage Industry
We continue down the road remembering the challenges behind us while keeping a cautious eye on the horizon. The point is we are not finished yet.
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While home prices may have been bottoming, many observers are very concerned that with the end of the major “robo signing” lawsuit there will be a tsunami of properties entering the “for sale” market this summer.
Yet there is a finite number of homes within the previously stalled foreclosure process but it could be as high as 18 months of such homes. Some see this as a drawn out problem for several years due to politics and the problems this could produce for the re-election of the President. Others see this as an immediate problem which will work its way through the system in the next 18 months or so. Either way, it seems as to foreclosures, we are nearing the end of the eye of the storm as to the bloated number of homes available for sale.
What will happen and how to prepare for it are questions for those who are much closer to the situation. Among other questions which must be raised is how soon before we see home appreciation averaging above 2% on average nationally? Will mortgage credit and down payment requirements be loosened sufficiently to permit a far more normal market? When we see not only lower unemployment rates but also fewer part-time jobs and higher wages?
As Mr. John K. Lunde wrote to me last night we need to see better case number assignment numbers before we can begin to confidently say things are getting better. I would quickly add we also need to see much better conversion rates along with it.
While some say to be happy that the conversion rate is lower because that shows seniors are making more informed decisions due to the new counseling protocol and FIT. With no proof or evidence to back up their claims, such statements are clearly more deflection than fact. There are many questions beginning to rise about the competent use of FIT by counselors. My questions are about FIT itself. But one thing is true, whether it was the MetLife financial assessment understanding standards or the NRMLA letter to Ms. Hill, lenders show no faith in the deflective message that counseling is preventing more T & I defaults as allegedly reflected in lower conversion rates.
The CFPB report can do damage at three significant levels:
First, it could provide the ammunition which our Democratic political opponents such as Senators McCaskill and Kohl need to refuel their attacks. It could also make fiscal conservatives wary of it. Until we are once again self-sustaining, this could produce much damage on several fronts where we need the unwavering support of Congress right now.
Second, there is the old faithful, headline risk. Over the years, Peter Bell has been famous for saying that bad press comes in waves. He was and remains right. By merely being a government report, its findings will have credibility. Poor findings WILL become headlines and many negative articles.
Third, well intentioned regulators and state lawmakers could draw from inappropriate or even reasonably appropriate findings that our product must be better regulated. This could lead to another wave of legislation and proposed and implement regulations at many levels in many different government bodies.
What is not needed is wild and over reactionary input at this point but reasoned proactive input from industry leaders. When the report is produced, our response should be reasoned and rational.
Prepare yourself now. There will be things in the report none of us like but hopefully, the report will be sufficiently even handed and unbiased that it will show that despite some prior problems HECMs currently are not only great as loans of last resort but also a financial product with real promise in meeting the financial needs and goals of the more affluent. All we can do is hope and support those who are being asked to represent our industry.