Not too many years ago there was a time when the typical reverse mortgage professional could confidently build their business on a singular loan; the Home Equity Conversion Mortgage. That business model has become increasingly difficult to sustain in recent years. While some continue to succeed only offering the federally-insured reverse mortgage, others have diversified their product offerings to buffer against continued cutbacks and requirements that have become the new norm for the federally-insured reverse mortgage.
While all mortgages are sensitive to current interest rates, the HECM has the added challenge of bearing the brunt of repeated and significant regulatory changes, underwriting standards, and mortgage insurance premium pricing modifications. It soon became clear that dependence came with a cost.
Many can recall the irony of taking the required National Mortgage Licensing Safe Act exam whose questions that centered almost exclusively on traditional mortgage lending rules and terminology. Sure there may have been one or zero questions remotely related to the Home Equity Conversion Mortgage but many found themselves frustrated having to absorb a glut of information not remotely related to their origination practice. Who would have known this test would herald an upcoming seismic shift for our industry.
While those reverse mortgage professionals that began offering traditional mortgages enjoyed a more diversified business model they still found older homeowners struggling to tap their housing wealth without the burden of required monthly payments. While providing the means to generate an alternate income stream, the need to provide a viable alternative to tap into housing wealth remained. Fortunately, HECM lenders have launched several proprietary or private reverse mortgage programs this year that may provide some relief for originators and homeowners alike.
Several years ago the Federal Housing Administration stated their desire for a more robust private mortgage market that is less dependent on the backing of the American taxpayer. One could say the curtailment of the HECM and the expansion of private reverse mortgages has taken us one step closer to achieving that goal.