Older borrowers deserve to know their options before getting a traditional mortgage
Whether it is due to over-regulation, the sheer size of our housing bureaucracy, or crony capitalism, the mortgage marketplace is not a level playing field, especially when it comes to traditional and reverse mortgage lending. Despite the creation of the Consumer Financial Protection Bureau and other agencies created to protect consumers in the wake of the housing crash and questionable lending practices, problems remain.
Chief among those problems is the continuing lack of disclosure to older borrowers who cannot afford to choose the wrong mortgage option.
A level playing field in the mortgage marketplace is a noble concept that would place each player in a position to have an equal chance at succeeding abiding by the same set of rules. Unfortunately, such an aspiration is highly impractical in the mortgage marketplace as loan product features and risks vary wildly. Regardless, perhaps improved disclosure requirements should be required for traditional mortgage lenders, brokers and loan officers, just as HECM professionals will be required to disclose “all HECM products, features, and options that FHA insures.” Such a requirement may have prevented an 82 year old woman with a meager income and a part-time job from being placed into a 30-year mortgage- who a short time later lost her job and is now facing foreclosure.
4 Comments
Horrible idea. Let clients and mortgage professionals decide what they talk about. We don’t need more laws forcing more disclosures. If a mortgage professional doesn’t want to discuss the HECM that should be his/her choice. Many seniors HATE the idea of a HECM, and bringing it up can make them hang up the phone or kick an originator out of the house. Please don’t suggest anybody should be forced to do anything. I know HECMs can save people, but some people don’t want to be saved. I absolutely hate the idea that this is even being floated.
Great Topic !! Keep ’em coming…. Thanks!
The situation with HECMs and its originators is much different than the mortgage community at large and all originators. The new regulatory language related to discussing all HECMs is in the body of regulations only governing HECMs; thus it only applies to HECM originators.The regulation applies to a loan that HUD insures and only to situations where that specific type of loan is being offered by a lender.
HUD cannot mandate rules on NMLS licensees that exceed the authority granted to HUD by Congress. As to the percentage of questions on the NMLS exam on reverse mortgages, the number of question is about proportionate to the reverse versus forward mortgage origination ratio in other words only about 1% of all mortgages originated each year in the US are reverse mortgages.
It is not up to forward originators to do our job for us. They, like we, have a general duty of care to their customers not a fiduciary one, unless stipulated to the contrary under state law.
Yes, we may want to be treated with a higher degree of trust and respect but until the legal standard of duty is raised to that of fiduciary, seniors should treat us no differently than they do other licensed salespeople who only have a general duty of care.
Here here Shannon, right on!