[vimeo id=”96861513″ width=”625″ height=”352″]
Does the new HECM still meet the mission of the HECM program?
Over the last several years we have seen HUD reshape the landscape of reverse mortgage lending. Reduced principal limit factors, first year distribution limits and the upcoming financial assessment leave some wondering if we will be able to serve senior homeowners who will truly need our services. The answer is yes, for the most part. Their is an entrenched belief by many that the Home Equity Conversion Mortgage Program was intended for seniors with little resources or the needs-based-borrower. Let’s examine the the government’s Office of Information and Regulatory Affairs statement prior to HUD’s sweeping changes to the HECM program. It reads in part “The original intent of the HECM program was to ease the financial burden…
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9 Comments
Yes Shannon, I’m pretty faithful to listen to your daily dialogue. Today, you’ve clearly gone into “spin mode”. I like the good news stuff like anyone, but in the field, yesterday, I turned down two emergency RMs because there wasn’t enough money in the kitty to pay off the mortgage. And, of course, we still don’t have the financial assessment debacle. Spin that one for me Shannon, but don’t expect me to buy in. I’m in the field — where you once was. The “need” market is being left behind and the mission is spoiled by the regulators. Yes, the market is still in there some place but a big part of it is going away now, and we haven’t seen the worst yet. That’s my take, but I don’t have to do what you do to shore us up. We’ll see, but I think your glasses are getting foggy (too).
Few disagree with Mr. Strycker that it is deplorable that we cannot help more seniors. Yet if we want to help seniors through originating HECMs, we only have the products we have. Rather than focusing on whom we cannot help, we need to refocus our marketing to reach those over 62 who are not part of what was our traditional market, particularly the mass affluent.
It is clear FHA did not want to change the program so drastically; yet to save the program and not fight a losing battle for little program change, HUD took the bull by the horns and came up with a plan which makes the program fiscally sound for some time to come. And, yes, most of us agree the HUD plan went overboard but once again it is all we have.
We could waste our time writing our own book of lamentations (but it would not be in the Bible). We could spend hours every day repeating its truth but who would be helped? We could preach sermons on it with professional mourners bellowing out our anger and hurt but what would that accomplish?
Like so many I do not believe that the new HECM is better for borrowers. Yet again there are a significant number of financial planners, real estate salespeople, and even builders all hailing the new HECM as a great financial product.
Like the farmer we need to sow where our seed will have the greatest chance for success. Learning where and how to sow is probably the most difficult part of tailoring our sales practices so that we get the most bang for our efforts. I take my hat off to those who have found this tailoring process easy.
What is the The Office of Information and Regulatory Affairs (or OIRA) and why is its opinion so important that we look to it for answers? The White House website describes the OIRA as “a Federal office established by Congress in the 1980 Paperwork Reduction Act. It is part of the Office of Management and Budget, which is an agency within the Executive Office of the President. It is staffed by both political appointees and career civil servants.” (See http://www.whitehouse.gov/omb/inforeg_administrator) So what does the quoted information mean in plain English?
OIRA is an Agency overseen by the OMB, an executive branch agency which creates the President’s annual budget. OMB is highly political and the statements of OIRA are susceptible to political influences. So who really cares what it has to say???
Like many of us I was raised around the ideas of Santa Claus, the Easter bunny, the tooth fairy, and various myths about the infallibility of some of our founding fathers. Then I began growing up and no longer promoting fairy tales. It is time for all of us to grow up and begin to separate HECM myth and fact.
Coming into the industry, there were many tales (i.e., myths) of why the HECM program was created. Some spoke reverentially about aging in place, saving homes for seniors, and even how HECMs had changed the diet of some seniors from dog food to a healthy diet with three squares a day. Yet these are all byproducts of the program, not the reason that Congress created the program.
With law, many times, the legislative branch never tells us why it created this law or that law. Many times we rationalize why through official Congressional explanations of the law or the report of the Managers of this House (or Senate) Sub (or Full) Committee. Yet those documents are not part of the law and reflect the opinions of a handful of people and many times are written months, if not on rare occasions over a year, after the original bill was written.
HECM law is much different. It is unusual in that Congress voted and the President signed it into law with a clear statement as to its purpose embodied in the actual law itself. In fact it is the first provision of the HECM law and can be found at 12 USC 1715z-20(a). It is short and to the point. (See http://www.gpo.gov/fdsys/pkg/USCODE-2011-title12/html/USCODE-2011-title12-chap13-subchapII-sec1715z-20.htm).
It is time we all dropped the myths and simply agreed that the law states its own purpose. It is not aging in place or helping needs based senior homeowners, or any other myth but rather it is a means of providing cashflow to senior homeowners through a mortgage.
Finally! I’m no longer the first to decry NRMLA’s, HUD’s, and the industry’s expectation that those of us in the field tote their water buckets. Each time HUD makes HECM’s more difficult to obtain, we are all expected to genuflect and immediately adopt the latest HUD mantra.
An honest appraisal of what brought HECM’s into the mainstream cannot discount the fact HECM’s were an answer to the government’s malfeasance and mismanagement of the Social Security Trust Fund. Now, lest your head has been deeply buried in the sand, you recognize it was more of the same that drove the draconian program changes of October last year.
For nearly two years HUD has beat the drum of tax and insurance default driven foreclosures. At the very best, HUD’s accounting is suspect, especially since it was HUD that engineered desegregation of the MI Trust Fund. Certainly reducing tax and insurance defaults is critical but it’s less a matter of borrower ability or willingness as HUD describes it than one of a failure of servicers to periodically recommunicate those requirements to borrowers and, in particular, to “alternate contact” people as well.
Unfortunately, HUD has chosen to place the burden of program resurrection squarely on the backs of the the needs based borrower. To HUD, they are no longer relevant.
Just because HUD – with NRMLA in lockstep – has abandoned need-based HECM lending, those of us in the field must continue to respect and serve those needful borrowers who brought us the success we’ve enjoyed since 1989.
Mr. Sias,
There is a great need in this industry for open and frank discussion of the things that impact us. To that extent, I fully support your opining on the changes HUD made effective on 9/30/2013 and those which we are told will be implemented near term.
What angers me about your statements is your UNPROVEN ALLEGATION that HUD has “engineered desegregation of the MI Trust Fund.” Since I have read both the independent auditors’ reports for the MMI Fund and the separate independent auditors’ reports for the HECM portion of that fund (along with the related financial statements) since fiscal 2009, I find that quotation a fabrication of your imagination perhaps triggered by misconception and ignorance.
There is not one hint of desegregation of the MMI Fund (or the MI Trust Fund as you call it) in any of those audit reports nor is it mentioned in any of the annual independent actuarial reports for either the MMI Fund or the separate annual independent actuarial reports for the HECM segment of that fund covering the same time periods. So where do you get the objective and verified evidence that HUD engineered any desegregation of that fund?
Your charge is a serious one and should not be tolerated by anyone who knows this program and has invested years in this industry. Your unsupported accusation is a discredit to you and unfortunately our industry.
The falsehood you promote ruins whatever the point of your comment was.
(The opinions expressed are not necessarily those of RMS or its affiliates.)
More than a few times (and in some very public forums, as my colleagues continue to remind me) I have asserted a disparate impact suit could well have standing, as our elderly female and minority borrowers seem disproportionately impacted.
Because the General Fund so quickly returned to a negative subsidy – the fed’s term for being in the black – FHA’s actions look to have been made in haste; certainly there appears little doubt changes were unnecessarily severe.
As truly delighted as I am to see more seniors setting up “reserve” reverses, my heart breaks for those we so recently could have helped, those who now have nowhere to turn. The impact of reduced principle limits is going to be long lived, and sadly, seniors who have lost their homes are unlikely ever to recover.
Gentlemen, may I make a closing plea: as dissatisfied as we all are with the current state of the program, please find mercy for NRMLA. Speaking personally as one who wrote for a lobbyist, I can attest to the fact interests that hold out for 100% every time do not last long in the unforgiving Beltway universe. Marty, Peter, and their staff have done a very good job of preserving – nay elevating – the reputation of both the product and its originators. Did we get everything we wanted? No. Is the story finished? Not yet. Could it get worse before it gets better? Absolutely. But we’re in this for the long haul…so we’d best do some long-distance training. We’re going to need it.
I would not be surprised to see FHA roll back some of its more draconian measures, but I’m not expecting to see that happen tomorrow.
Press on, colleagues, press on. I think the best is yet to come.
Ms. MacNaughton,
You wrote: “Because the General Fund so quickly returned to a negative subsidy – the fed’s term for being in the black – FHA’s actions look to have been made in haste…”
What is the significance of the General Fund having a negative subsidy when the reason for the changes is because of the projected losses in the HECM portion of the Mutual Mortgage Insurance (or “MMI”) Fund?
The only HECMs accounted for in the General (Insurance or “GI”) Fund are those which were endorsed before October 1, 2009. Since September 30, 2008, all new endorsements are being accounted for in the MMI Fund in accordance with HERA.
Since there are still HECMs accounted for in the GI Fund, your reference to it is very confusing.
Can you please clarify? Thanks.
[By the way only one person (other than you) in this thread referenced NRMLA. Were you addressing yourself to that person?]
The LTV now down to 50% and soon need all financial assessments, are we doing the a forward mortgage? Or putting harder for a senior to qualify RM then FM?
There’s stated income refi pogroms out there for 50% ltv, Does Hecm make sense now?
L Sun,
Probably much less sense than it once did.