HECM Changes: For Better or Worse?


Do Recent HECM Changes Help or Hurt our Industry & Consumers?



Certainly one could argue that the recent changes to the federally-insured reverse mortgage have improved the reputation of the program in the eyes of financial planning professionals and the media alike. While additional consumer protections are admirable, do the numerous policy changes signal a turn for the better or worse?

man-holding-scaleA recent MarketWatch article “Could the tide be turning on reverse mortgages?” asks just such a question. Columnist Alicia Munnell opens with “after decades of skepticism and reports of scandals, the tide appears to be turning for reverse mortgages”. The New York Times Business section recently led with a story on the ‘revival of the reverse mortgage’.

While there may be a revival of the reverse mortgage in the consciousness of the mainstream media and in the minds of media pundits, our industry is not experiencing a revival but a retraction, as HECM endorsement volumes…

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3 comments

Mary Jane Golden June 20, 2016 at 5:43 am

The dilemma, for both retirees and the government, is the fact that senior’s retirement accounts are under-funded and thus, retirees will be seeking government assistance for long-term care assistance, possibly housing etc.

If the government would provide an ‘incentive’ to retirees to tap into their home equity via a reverse mortgage, it could shift the emphasis away from government-sponsored programs for long term care to ‘privatization’ of long-term care.

Seniors could age-in-place longer by using their own equity funds to stay at home, thus pushing off the looming crisis of not enough facilities and not enough money to take care of the boomer demographic.

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George Owellia June 25, 2016 at 12:34 pm

And what about renters and the homeless? Shouldn’t they be able to get a phantom reverse mortgage? And what about undocumented aliens, we cannot forget them.

Oh, yes, we already have the kind of program you are suggesting. It is called Medicaid which results in a lien against the home.

Perhaps you are suggesting a mirrored reverse mortgage so that if someone already has a home on which a lien can be placed, this new reverse mortgage would simply attach to the reflection in the mirror rather than to the collateral itself.

Excuse me but I am no Bernie Sanders Socialist.

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George Owellia June 20, 2016 at 4:43 pm

Only time WILL tell.

As soon as FHA turned the HECM program away from a social services based mortgage to its intended purpose of providing cash flow, the turn was seen by many as a betrayal of HUD to those the agency was created to help. Thus our marketing message is impotent, costly, and still in flux.

Expect confusion of message to remain until the vast majority of those who find saving homes for seniors the most desirable part of their jobs are out of the industry. It is for this reason that some have called for a new group of originators who are not tied to the past and have a competent background in cash flow matters. Most of our current originators do not.

The important thing is that we all move forward with the goal of providing our seniors with the best and highest use payout alternatives we can and remind them that having the help of a competent financial adviser who is required to use a fiduciary standard when providing advice to their clients, could be worth many times the cost.

Until lenders are willing to hire a new core of originators, pay for the training they will need to be effective, we can expect little more than a slow bounce type growth endorsement pattern until age has taken out current lender leadership and the majority of today’s originators.

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