Politics, Gridlock & CFPB Enforcement


ePath 100K RM leads

Political gridlock, proposed changes & CFPB finding on HECM APRs

We’re in the full swing of the political season as the 2020 presidential race is underway. In a recent LGBTQ Town Hall hosted by CNN on October 10th, former HUD Secretary Julian Castro called out the agency’s head Ben Carson for his remarks during an internal meeting while visiting HUD’s San Francisco office.

The Washington Post reported in September “Carson also lamented that society no longer seemed to know the difference between men and women, two of the agency staffers said”. During the LGBTQ Town Hall candidate, Castro said, “The comments that Secretary Carson, my successor, made a couple of weeks ago are shameful. When you’re housing secretary, you’re there to serve everybody. And his comments made clear that he’s not able to serve everybody”. A HUD spokesperson denied the use of any derogatory language. It’s reported that Carson plans to leave HUD after the 2020 presidential election to return to the private sector should Trump be reelected.

And in other news, distraction and gridlock in the nation’s capital may be a good thing- at least when it comes to proposed additional changes to the federally-insured reverse mortgage. Two changes that remain unsettled are the return to geographic or county lending limits instead of the current national lending limit, and the removal of the HECM from FHA’s Mutual Mortgage Insurance Fund. Both reforms were promoted in the Trump Administration’s Housing Finance Reform plan released earlier this year in March.

In his prepared written statement for last month’s hearing on the HECM NRMLA President & CEO Peter Bell wrote, “Area-by-area’ loan limits penalize homeowners who have improved and maintained their homes over the years and have accumulated more equity as a result of higher home values. Applying the forward mortgage concept of ‘area limits’ to a financial resource (HECMs) created for a completely different population at a completely different time of their life would be ill-advised”.

CFPB REPORT ON APRs in HECMs

Pending HECM Changes: The Industry Waits


ePath 100K RM leads

Proposed changes linger after Congressional hearing

As one commenter on HECMWorld put it ‘The HECM program got through the hearing all but unscathed’. Very true considering our long history of continued reductions in Principal Limit Factors and restrictions on how proceeds are distributed. That being said, we have several significant HECM changes that have yet to be finalized or announced with an implementation date which has many of our viewers asking when if these changes will be finalized, and if so when.

Of the three most notable changes, two are legislative requiring Congressional approval. The first is an unnamed pending House resolution which would eliminate the national lending limit for HECMs and instead revert back to county-by-county lending limits- or the FHA area maximum loan limit. How such a change would reduce FHA’s risk exposure from HECM loans remains to be seen. Homeowners with higher valued homes in rural counties stand to be impacted the most.

The second would be the removal of the HECM from the

 

The Condo Catch-22 & Nine HECM Changes


ePath 100K RM leads

Spot Condo Approval Catch & 9 Recommended HECM Changes

Despite the positive development in Condo approvals for HECM loans, there’s one catch when it comes to spot approvals that have gone largely unnoticed. Plus: the GAO recommends 9 changes to the HECM program…

 

HECM reforms the focus of Congressional hearing



ePath 100K RM leads

Recent improvements, racial targeting, and some surprising suggestions

Despite the impeachment drama in our nation’s capital, the House Financial Services Committee’s hearing on the HECM was held as scheduled. It shows that some Congress members view of the HECM has evolved and some interesting proposals were put forth from the expert witnesses…

Documents referenced:
“Preventing Foreclosures on Seniors Act of 2019” [DRAFT]
A bill to conform HECM lending limits with FHA area limits

VIDEO REPLAY OF HEARING

A preview of Wednesday’s HECM Congressional Hearing

House Financial Services Committee memo on HECM hearing reveals priorities and focus points

This Wednesday the Home Equity Conversion Mortgage program will face the white-hot glare of Congressional oversight and scrutiny. The House Committee on Financial Services will be reviewing the benefits and challenges of the Home Equity Conversion Mortgage- better known as the reverse mortgage.

A September 20th memorandum reveals the witnesses and primary subjects to be discussed. The document was released last Friday to members of the committee to help them prepare for the hearing.

Scheduled witnesses include:

  • Sarah Bolling Mancini, Staff Attorney, National Consumer Law Center
  • Alicia Puente Cackley, Director, Financial Markets and Community Investment, Government Accountability Office (GAO)
  • Peter H. Bell, President & Chief Executive Officer, National Reverse Mortgage Lenders Association (NRMLA)
  • Laurie Goodman, Vice President, Housing Financial Policy, Urban Institute

After a brief summary of the HECM the memo details the development of the non-borrowing

.
spouse policy- a reform that was championed by the committee’s chairwoman Maxine Waters. Also included are the numerous HECM reforms enacted since 2013- the year that the Reverse Mortgage Stabilization Act went into effect. Those reforms include first-year distribution limits, the financial assessment, the partial reimbursement of property charges paid by lenders on behalf of a borrower, and the collateral risk assessment which may require a second appraisal if the valuation exceeds HUD’s AVM (automated-valuation-model).

Issues related to servicing of HECM loans and foreclosures are likely to take center stage. “A recent USA Today article shed light on some of the problems that persist with foreclosures of reverse mortgages despite attempts by Congress and the HUD to improve the program” the memo notes.USA Today reported that a few unscrupulous lenders focused selling reverse mortgages specifically in poor neighborhoods- many which were predominantly black. Some of these homeowners were evicted. Just how many HECM borrowers were actually evicted from their home? That question reveals a significant weakness that still endures in HUD- a lack of data. “The article (USA Today) points out that while regulators claim actual

evictions of seniors are rare, there is no way to verify this claim because HUD does not collect this data, let alone report it.”

Click here to watch a live-stream of the hearing on Wed, September 25th, at  2 p.m. Eastern.

In its legislative note the memo references a previously drafted but not enacted bill- House Resolution 4160. The bill would have provided additional protections for non-borrowing spouses and required the immediate assignment of a HECM to HUD when the borrower has passed away and the eligible non-borrowing-spouse remains in the home.


It should be noted, the Congressional memorandum contains a significant error. It incorrectly states that “Since 2013, HUD has limited lump sum payments by reducing the amount that borrowers could draw during the first 12 months of the loan and increased mortgage insurance premiums if initial draws exceed 60 percent of the principal limit”. Mortgagee Letter 2017-12 repealed the two-tiered upfront FHA mortgage insurance premium structure and instead charges a flat upfront two-percent premium regardless of the money taken at closing.

 

 

Lifelong Mortgages: The New Norm?


ePath 100K RM leads

Younger borrowers are taking longer mortgages- then comes a reverse?

When debt is king and aging populations are exploding across developed countries, more are finding themselves with a mortgage throughout their adult years. Lifelong mortgages may soon become the rule rather than the exception. Overall baby boomers are not doing too badly when compared to younger generations, but they have challenges as well. Fannie Mae reports over 51% of baby boomers are still paying a mortgage. CNBC columnist Bob Pisani writes that 45% of baby boomers born between the years 1946 to 1964 have zero savings for retirement…

While we can debate the exact percentages one trend is emerging. Fewer older American will be paying off their homes before retirement, or for that matter before they die.  That should come as no surprise as only…

 

HUD Secretary committed to HECM changes


ePath 100K RM leads

Secretary Ben Carson’s prepared remarks for recent Senate hearing confirm HUD’s mission to enact key HECM reforms

While politicians squabble over the government’s role in making homeownership a reality, older homeowners who wish to use their home’s value to age in place were left out of the debate in the hearing room. That doesn’t mean the HECM program is not facing some significant changes. In his prepared remarks, Secretary Carson outlines three changes- two which would require Congressional approval, and the third a mere policy change by the Federal Housing Administration (FHA)…

.

 

Reverse Talk: Chris Kargacos

Chris Kargacos is the Executive Vice President of National Sales for Retirement Funding Solutions. Having began as a loan officer in the field he is passionate about equipping and training his sales team to reach their full potential as HECM originators…

BREAKING: Major HECM Changes Announced


ePath 100K RM leads

HECM-to-HECM Refis Targeted, Appraisal Scrutiny & More

Late last Thursday afternoon we received word that the Department of Housing and Urban Development (HUD) in cooperation with the Treasury Department presented President Donald Trump with their plan for reforming the Nation’s housing finance system and the Home Equity Conversion Mortgage program. This was in response to President Trump’s March 2019 memorandum for housing finance reform.

First the good news- there are no indications of further HECM principal limit factor (PLF) reductions or dropping the current interest rate floor. Second- you may want to watch the current national lending limit for federally-insured reverse mortgages. HUD is recommending Congressional approval to…

 

Spendthrift Risk & Negative Interest Rates


ePath 100K RM leads

Spendthrift homeowners pose a risk

I’ll never forget it. As I drove down the wooded driveway I saw it- a 40-foot used RV. I was a bit perplexed as I approached the front door of the couple who had inquired about a reverse mortgage the week before. There was no application submitted or even completed for that matter. I quickly learned they assumed their loan would go through and decided to buy the RV to treat themselves for an upcoming family reunion. Sadly they didn’t qualify.

The lesson? The poor spending habits of older homeowners not only continue after they get a reverse mortgage, but are often one of the largest contributing factors why they needed to eliminate an existing mortgage payment in the first place...