HECMs vs. The Establishment

[vimeo id=”164647027″ width=”625″ height=”352″]

The Financial Planning “Establishment” Still Reluctant About HECMs

reverse mortgage newsTo use a political analogy, reverse mortgages are the anti-establishment candidate. Long viewed as a loan of last resort, criticized for high costs and maligned by many consumer groups as being fraught with pitfalls the new reverse mortgage continues to push against the financial establishment for its place at the table of retirement options.

A recent article in the Retirement Income Journal outlines why many financial advisors and reverse mortgage professionals don’t get along. To be fairer let’s say ‘see eye-to-eye’. Yes, despite the numerous uptick of interest in the HECM within the financial planning community, most do not recommend nor consider a reverse mortgage according to the article. “As a practical matter, advisors who don’t have mortgage licenses can’t make direct commissions from a HECM or earn a finder’s fee for a HECM referral…

Download a transcript of this episode here.

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3 comments

Steve Kalscheur May 2, 2016 at 5:23 am

Training, training. Fact is most originators don’t have a financial planning background. So engaging FP’s on their playing field is a tough one. Either train or find better originators who are given adequate incentives to open the door to this sector.

Reply
James E. Veale, CPA, MBT May 2, 2016 at 12:22 pm

This vlog distorts the issue of financial professionals becoming HECM originators. HERA makes it a requirement that those who sell insurance or financial products of any kind not participate in HECM originations.

All of us should report all lenders and TPOs who violate the standard promulgated in HERA as codified in 12 USC 1715z-20(n)(1) stating: ”

(n) Requirements on mortgage originators

(1) In general

The mortgagee and any other party that participates in the origination of a mortgage to be insured under this section shall—

(A) not participate in, be associated with, or employ any party that participates in or is associated with any other financial or insurance activity; or

(B) demonstrate to the Secretary that the mortgagee or other party maintains, or will maintain, firewalls and other safeguards designed to ensure that—

(i) individuals participating in the origination of the mortgage shall have no involvement with, or incentive to provide the mortgagor with, any other financial or insurance product….”

If this is going on, the lender or TPO should be fined and otherwise punished to the full extent of the law. If the law is wrong, then change it but until then, it is up to us to police this issue and hopefully the OIG will immediately investigate any and all notices of noncompliance no matter what their source and report their findings in HUD publications.

EY (Ernst & Young) summarizes the purpose of the 2017 DOL Fiduciary Rule as follows: “The DOL’s stated objective of the rule is to mitigate conflicts of interest that exist between firms, advisors, and their clients and to address concerns that firms and advisors are incentivized to recommend products or services that may not be in the best interest of the customer.” The HERA provision on human beings who qualify to originate HECMs is not much more different in substance.

Reply
The_Cynic May 2, 2016 at 12:26 pm

James,

I would love to hear NRMLA’s take on this issue. Today we see at least one originator declaring that at least one HECM originator who in their hiring habits regularly violates the law.

Reply

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