AARP’s Six Fixes for Reverse Mortgage Program

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Lobbying Group Pushes Lawmakers for More Change
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Reverse Mortgage News

The powerful lobying group AARP with it’s 38 million plus members has incredible clout in Washington DC. In a recent Senate hearing before lawmakers they suggested six changes to the federally insured reverse mortgage program. The group believes these changes would improve consumer protections and improve FHA’s fiscal condition. ** First they support the proposed changes to the HECM program including the financial assessment, tax and insurance set asides and limited upfront draws from any product. It’s a delicate balance between increased regulation to protect against losses while providing sufficient access to credit to seniors. **Second. AARP believes HUD failed to act when problems arose in the past. Therefore AARP recommends that HUD be required to report to Congress biannually…

8 comments

Chuck Young July 1, 2013 at 3:28 am

We have enough regulations already after the Dodd- Frank debacle. The fiduciary responsibility requirement would require me to buy extra insurance I don’t need.

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Marshall Gallop July 1, 2013 at 5:08 am

Nanny state is more appropriate statement here. If we keep adding the CFPB/fiduciary attitude to a program, we will cut off it’s legs. The comment about H4P “assumptions” is about like the CFPB “study” of reverse that asked not one question of a senior, but depended on the thoughts and opinions of Washington “nanny staters”. I find my H4P buyers very astute on their retirement plans, and this becomes a great hedge for their retirement risk that they must study with their financial counsels/advisors to consider. I’m in the “wheelhouse” of this product and if wife was 62 already we’d have one because I feel more safety with it, than I do that Central Bank’s aren’t manipulating gold and other investments so why should I think I have only market risk there. Lastly, FA could include whether a borrower has the ability to pay their taxes/insurance and anything other than them “paying into” an escrow like account is another leg cut off the program.

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Jerry Hanley July 1, 2013 at 5:41 am

I’m sorry, but my trust level with AARP is similar to the one I have with a Pit Bull. They may have 38 million members, but how many are members only for the use of their various benefits, specifically Medicare supplement products,? They certainly do not represent my political standings. As soon as a competing association can match their insurance products, I will no longer be an AARP member. I’ll take bets on how many of those 38 million will join me.

Politicians should not assume AARP steers my politics and my vote. They do not.

After many years in the mortgage industry I am no longer amazed at how our government continues to limit the use of our money and assets. Heaven forbid they show the same constraint with how they levy taxes and spend them!

I hope that every reverse mortgage professional in the country will remember that it is their right and duty to share with their representatives in DC, their concerns for HECM. Let them know the wonderful results of a well presented product. and the negative results that will no doubt occur if the program becomes too limited.

Grass roots efforts are extremely important. The more our local represents here from us, the more they will take notice.

Do we have a list of the Senators on said committee? We all should call their offices and let them know we are out here, watching and voting.

Shannon, you are spot on with your closing statement. Thank you for this update.

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CLIFF RIDDLE July 1, 2013 at 8:27 am

I  don’t  believe  anybody  in AARP  is capable  of  making  the  decisions  on  r.m.s ,,,a bout  a  year  ago  they  were  against  them ???A RRP  used  to  be  a  good  organization  tell  they  went  into   the  business  of  selling  insurance  and  anything  else  they  can   make  a  dime  on,,,i  would  like  to  see the  credentials  of  the  people  that  came  up  with  the  six  changes  after  omitting  the  young inexperienced  lawyers  that  must  believe  that  anybody  over  the  age  of  62  is not  capable  of  making  a  decision  for  themselves and  no  longer  can  understand  english,,,,,,,,,arrp  should  clean  up  their  own  shop  and  give  their  members  some credibility,,,,,,no  officer  or committee  member  for  arrp  should  be  under  the  age  of  65.

They  should  have  to  have  a  LO license  to  represent   1  person  let  alone   millions. I tore  up  my AARP  card  over  5  years  ago…  hope  you  all  do  the  same.

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Michele Kole July 1, 2013 at 10:17 am

Nanny state indeed. You provided every reason why we all should tear up our AARP cards. Their condescending attitude is what’s wrong with most of congress and the roll out of Dodd-Frank, CFPB, et al.

They are destroying an amazing financial tool that should have the flexibility to provide seniors with what they think is best for their future. Not AARP’s ideas. After All – whose money is it?

They are cutting the legs out from under the Reverse Mortgage program by their misguided attempt to over-regulate the industry. Isn’t this the land of the free? Don’t we still have a right to think for ourselves and choose what’s best.

The seniors I work with have all their faculties and certainly resent anyone telling them how they can spend their money.

For those looking for an alternative to AARP try AMAC (Association of Mature American Citizens) – a conservative group that believes the American dream is still alive. I have always thrown the AARP material in the trash whenever it comes. Never accepted their baloney.

Thanks for all the great comments. Sounds like most of us are on the same page.

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Vince July 1, 2013 at 10:36 am

I recommend NO more changes to program! My well educated clients do NOT need any advice or help from the government on how to handle their finances!

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The_Cynic July 1, 2013 at 1:00 pm

The HECM program under the direction of FHA has every right to be questioned and challenged with HUD predicting the HECM portion of the MMI Fund will still go deeper into the red by $2.6 billion by the end of this fiscal year, less than three months away.

With OMB indicating something was going wrong in the HECM portion of the MMI Fund as early as spring 2009 and FHA doing so little about it, HUD needs to be challenged about the direction the HECM program has and is headed. This occurred less than one year after the HECM portion of the MMI Fund was created without benefit of any actuarial or audit reports confirming there was any problem. Consultants to both our industry and HUD (such as New View Advisors) were warning about this potential situation for some time although the severity of the problems was far too underestimated and their recommendations too narrow and limited.

While there were industry cries in 2009 that money was being siphoned from the HECM program into other programs, the facts are FHA had to pin up the HECM portion of the MMI Fund by taking over $2.2 billion in funds from other MMI Fund programs during fiscal 2010 and 2011; those transferred funds (plus lost earnings to those funds on the transferred funds) have yet to be repaid to their respective programs. When it was too late, FHA did try to correct and re-correct the situation through principal limit factor adjustments and then as part of the re-correct increased ongoing MIP by 150%. Who knows if any of those adjustments has had any significant positive impact on the MMI Fund?

As the losses are now not only recognized by HUD but also being realized through terminations, do we (and FHA) have the patience not only just to hear the arguments of our critics but also to consider what it is they are really saying?

Without some evidence it does not serve AARP well to accuse a higher rate in fraud within HECMs for Purchase than with the program overall. With fewer than 7,000 endorsements since their initial implementation in early fiscal 2009, what evidence do they provide for those remarks in particular? For the sake of the industry and the HECM program it is good they added this statement to their testimony since it can be so easily attacked as little more than hearsay until proven otherwise.

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jeff featherson July 24, 2013 at 7:07 pm

I like the Cynic’s insight but we shouldn’t dismiss the real value of AARP’s position. The bottom line is that they are, in fact, continuing to support the very existence of the RM program. That remains a very good thing for baby boomers.

If you you can’t see that fraud is a real possibility in the H4P arena, you give far too much credit to Builders. Until a newly constructed home is established and seasoned within an equally established community, valuing that newly constructed home can leave a great deal to speculative guessing and the possibility of arbitrarily inflated pricing. The issue may be well clouded at present as new communities are few in number, but with an economic recovery and a resurgence in new construction starts, we could see a revisit to the pitfalls of 10 years ago- without some protections in place.

Two recommendations I would offer are: 1. For new construction values, possibly require a second appraisal, procured by the lender- much like some high Jumbo loans do, and 2. The 1.25% annual vig was initiated to stabilize the pool back in 2010. At its current rate, it becomes more of a penalty as the program’s profitability on new business continues to improve. Let’s encourage a reduction to a level somewhere in between then and now- maybe .75-.80% and find an alternative method to fund ‘old business’ value deficiencies.

We must also remain mindful that there is an art to political negotiations. There always needs to be more on the table than what is sought- otherwise it is considered concessions. As seniors, we are taking it on the financial chin every time this administration effects a change. We need a group like AARP (even if we disagree with their politics) to at least raise a voice that will be heard.

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