A Radically Different Approach

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ePath 100K RM leads

A unique approach to loan risk management

[Download transcript]

The concept of the reverse mortgage is not merely an American phenomena. China, India, the United Kingdom, and Hong Kong all have their own unique reverse mortgage programs to help their older populations age in place. However, one country has a unique and intriguing approach to managing risks to its program.

The Hong Kong Mortgage Corporation Limited offers the Reverse Mortgage Programme. One of the most interesting options offered is the ability of the homeowner to assign their life…

 

1 comment

James E. Veale, CPA, MBT March 18, 2019 at 3:09 pm

You would think with a $14 billion loss position in the MMIF for HECMs and their related assets, HECM lenders would have banded together and started working out how to address it by now. The NRMLA magazine has claimed that particular process went on last year which seems like a long time to finally get started. YET where are the results of that year of study? By not providing those results all we are left to conclude is that $14 billion is about the right cumulative loss for HECMs in the MMIF through September 30, 2018.

So assuming HUD is correct in its projected cumulative loss for HECMs and their related assets in the MMIF, then the only thing left to be done is to find ways to mitigate such loss. On September 28, 2018, HUD posted Mortgagee Letter 2018-06, that told us that the then current appraisal system may include significant overstatements of collateral value. The rules contained in the Mortgagee Letter were intended to mitigate the overstatement in value of the collateral at the time the HECM closes. YET for the first time we find a one year sunset rule associated with a Mortgagee Letter showing how little confidence HUD had in this Mortgagee Letter achieving its goals.

Some are blaming the aging of the originator core as the reason we are in the current extreme (yes, extreme) loss position so far for HECM endorsements. It is claimed that with aging comes less ambition, less drive, and overall lower production That argument has some substance but what is the cause and how can it be fixed? The answer lies with the employers of originators, the lenders. If the aging of the originator core is such a problem, well problem did not just pop up overnight. What this speaks of is lack of personnel planning, execution, and review with corrections. Yet if employers made the cure a priority, would it take long to cure? Or is it too late to fix the problem before the end of five years? If the problem is that significant for lenders, then it is in their power and only their power to correct it.

Some others are blaming the problem on financial assessment. On that issue it is far too late to correct it. For about four years we have been emphasizing how financial assessment is a consumer protection. Lenders lobbied and clamored for it with HUD. HUD did nothing wrong but I cannot say the same for either NRMLA or the lenders.

BUT it is the ideas that Shannon presents which have the greatest chance of bringing some amelioration to the plight of HECM losses in the MMIF. Or should we leave HUD to use the tried and true, reducing PLFs yet again? If you have ideas on how to attack the loss position of HECMs in the MMIF, please speak up.

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