Politics, Gridlock & CFPB Enforcement


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Political gridlock, proposed changes & CFPB finding on HECM APRs

We’re in the full swing of the political season as the 2020 presidential race is underway. In a recent LGBTQ Town Hall hosted by CNN on October 10th, former HUD Secretary Julian Castro called out the agency’s head Ben Carson for his remarks during an internal meeting while visiting HUD’s San Francisco office.

The Washington Post reported in September “Carson also lamented that society no longer seemed to know the difference between men and women, two of the agency staffers said”. During the LGBTQ Town Hall candidate, Castro said, “The comments that Secretary Carson, my successor, made a couple of weeks ago are shameful. When you’re housing secretary, you’re there to serve everybody. And his comments made clear that he’s not able to serve everybody”. A HUD spokesperson denied the use of any derogatory language. It’s reported that Carson plans to leave HUD after the 2020 presidential election to return to the private sector should Trump be reelected.

And in other news, distraction and gridlock in the nation’s capital may be a good thing- at least when it comes to proposed additional changes to the federally-insured reverse mortgage. Two changes that remain unsettled are the return to geographic or county lending limits instead of the current national lending limit, and the removal of the HECM from FHA’s Mutual Mortgage Insurance Fund. Both reforms were promoted in the Trump Administration’s Housing Finance Reform plan released earlier this year in March.

In his prepared written statement for last month’s hearing on the HECM NRMLA President & CEO Peter Bell wrote, “Area-by-area’ loan limits penalize homeowners who have improved and maintained their homes over the years and have accumulated more equity as a result of higher home values. Applying the forward mortgage concept of ‘area limits’ to a financial resource (HECMs) created for a completely different population at a completely different time of their life would be ill-advised”.

CFPB REPORT ON APRs in HECMs

The Trump Era & The HECM

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Good News for HECM, Not So Much for Housing Programs

budget2President Donald trump embodies the essence of a political wrecking ball in Washington D.C.- a city known to cling tightly to political traditions of governing and supporting long-standing social programs, despite our ballooning deficits.

While the President weathers opposition from both Democrats and Republicans alike, his administration’s draft 2018 budget for the Department of Housing & Urban Development reflects populist sentiments of a smaller, efficient government with parsimonious allocations for social program spending. Many feared the populist agenda would gut essential HUD, programs, and more specifically, the Home Equity Conversion Mortgage program.

Politico obtained a copy of the Trump administration’s preliminary HUD budget revealing plans to gut $6 billion from several programs including the outright elimination of the Community Development Block Grant, neighborhood initiatives, and a housing program for veterans. Despite these unpopular cuts, the HECM program was spared and even strengthened.

Two changes stand to liberate the HECM – the removal of the annual cap and the erosion of the unchecked powers of the Consumer Financial Protection Bureau…

Reverse Mortgage News Roundup

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This Week’s Top Reverse Mortgage Stories

1- CFPB Complaints on the Rise- The CFPB has been busy collecting consumer complaints. The Consumer Financial Protection Bureau reports an increase of 172% increase in reverse mortgage-related complaints since 2012. One could guess that much of this is due to increased consumer awareness of whom to report grievances to and how to do so. While the data shows a legitimate spike in HECM-related complaints, questions remain such as differentiating between mere questions and complaints that warrant with 80% not requiring any action. Industry trade groups such as the Mortgage Bankers Association, feel this serves only to mislead the consumers the CFPB is charged with protecting.

2- Stupid? A recent CNBC article said reverse mortgages aren’t for the ’stupid’. CNBC reporter Andrew Osterland opens his column saying “you don’t have to be old, poor, and stupid to get a reverse mortgage’. Perhaps Osterland is implying some ‘stupid’ homeowners fell prey to what he says tarnished the industry’s reputation in the first place- ‘cheesy television ads, unscrupulous brokers, and unwise borrower behavior’. He quotes University Professor and industry advocate Dr John Salter who says ‘The late-night ads are a really bad idea for the industry’. Overall the piece is a positive one citing the merits of the HECM when used wisely.

3-Government Shutdown? If there’s one certainty in life it is the political infighting in Washington, D.C., this time it could lead to a government shutdown. By the time you watch this episode, we should know if Republicans and Democrats were able to negotiate a stop-gap budget that President Trump would sign. If there is an extended shut down HECM endorsements would stop altogether, which would lead to a significant backlog. “FHA does not have the authority to insure additional HECMs during this period due to the statutory cap limiting the number of HECMs under the HECM program,” said a guidance piece issued by HUD during the last shutdown in 2013.

4- 2nd Annual Reverse Mortgage Education Week-Last week was Reverse Mortgage education week, during which the National Reverse Mortgage Lenders Association focuses on educating older adults, financial professionals, real estate agents, and family members about the Home Equity Conversion Mortgage. Topics included tax and insurance defaults, avoiding scams, and the repayment process.

Compliance: CFPB Levies Penalties on HECM Lenders

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Recent CFPB actions highlight the importance of compliant advertising and sales practices

reverse mortgage newsSince the founding of the CFPB (Consumer Financial Protection Bureau) in 2011, lenders have found themselves navigating the ever-changing waters of regulatory compliance. Reverse mortgage lenders  have recently felt the impact of the agency with three lenders paying substantial penalties levied. Today more than ever before, compliance is not a merely a burden, it is imperative for the well being of lenders and our industry as a whole. Breaking the Bad News: It’s not the kind of news one wants to break during a corporate earnings call. Walter Investment Corporation revealed two subpoenas related to their former origination unit: Reverse Mortgage Solutions. The subpoenas focused on the former HECM lender’s origination, underwriting and appraisal practices. Even more troubling was the announcement that… Download the video transcript here.