2019 may provide lenders time to adjust & rebuild
You can breathe a sigh of relief. While no official statement has been made it appears that the reverse mortgage industry will not see additional changes to the HECM program this fall. Good news, since these changes typically entailed significant cutbacks in borrower benefits. A brief respite is appreciated considering the fact a recent Aspen Institute report shows Americans median retirement account balance is only $14,500. The need for older homeowners to tap home equity to fund retirement has never been greater.
Just one year ago reverse mortgage lenders were rocked with the news of a reduction of principal limit factors, higher upfront mortgage insurance premiums for low-utilization borrowers, and a lowering of the interest rate floor. Where does that leave us for the coming year and is there a reason for optimism?
First, let’s be honest. We didn’t get to historically low loan volumes overnight and we won’t bounce back in one or two years time. However, we should remember that we have a new FHA Commissioner who has been openly supportive of the reverse mortgage program and who are committed to finding the root causes of continuing HECM losses. “We are digging deep in the portfolio to find out of the problem is on the front end or the back end. My sense is that it’s more on the back end in terms of the losses we are experiencing”. He also added, “We need to find that tipping point. If you make further changes to [principal limit factors], pricing changes, what is the tipping point to where volume drops, and there are impacts to the [HECM mortgage-backed securities]?”, said FHA Commissioner Brian Montgomery.
Speaking of tipping points, Scott Norman, vice president of retail sales and government relations at Finance of America Reverse sees one.“So at some point…”