Should we tear down the wall?

by Shannon Hicks
| One Comment
| February 25, 2019

Diversification or Separation of HECM and Traditional Mortgage Lending

As the national debate on the morality or effectiveness of a wall on our southern border rages on, one barrier is being slowly removed. As the number of the federally-insured reverse mortgage loans has languished in recent years, more former reverse-only lenders are making their entry into traditional mortgage lending; in effect removing what was once a barrier of niche mortgage lending for some.

Considering such diversification, it’s natural to ask if loan officers can be just as effective in originating both traditional and reverse mortgage loans. That question brings to mind a statement made 10 years ago by a formerly forward-only originator. Seeing the upcoming spate of changes to the HECM he said, “watch, they are going to turn this into a traditional mortgage”. One could easily argue the enactment of the financial assessment and the verification of an applicant’s income and assets does indeed mirror much of what is common practice for traditional mortgages. Despite the similarities, there are two conflicting viewpoints on whether originators should remain specialized or offer both loans…

Editor in Chief: HECMWorld.com

As a prominent commentator and Editor in Chief at HECMWorld.com, Shannon Hicks has played a pivotal role in reshaping the conversation around reverse mortgages. His unique perspectives and deep understanding of the industry have not only educated countless readers but has also contributed to introducing practical strategies utilizing housing wealth with a reverse mortgage.

Shannon’s journey into the world of reverse mortgages began in 2002 as an originator and his prior work in the financial services industry. Shannon has been covering reverse mortgage news stories since 2008 when he launched the podcast HECMWorld Weekly. Later, in 2010 he began producing the weekly video series The Industry Leader Update and Friday’s Food for Thought.

Readers wishing to submit stories or interview requests can reach our team at: info@hecmworld.com.

1 Comment

James E. Veale, CPA, MBT
February 25, 2019 at 1:54 am
Not every originator should be offering both categories of loans. Under federal law, they are distinct with a special definition for reverse mortgages found at 15 USC 1602(cc).

The old rationale for separating the two was that 1) reverse was focused on a specifically protected segment of the population, 2) with tenure payouts and a growing line of credit, the reverse had more attributes structured like an annuity than a traditional mortgage, and 3) reverses had their own unique characteristics and, therefore their own technical language and jargon, especially when it comes to HECMs.

As HECM monthly endorsement volume continues to dwindle, it seems expanding into the broader mortgage is a necessity even though it may not be the best course of action for the lender, the consumer, or the originator. These are the normal results for industries on a downward trend.
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