HUD Reins in HECM Program: Industry Reacts

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Exclusive Interview with Shelley Giordano from Funding LongevityScreen Shot 2017-09-01 at 9.41.37 AM

This week we discuss:

  • How HECM lenders will compete under the new rules
  • Potential changes to the how the HECM is viewed by seniors and HECM professionals
  • The recent changes in light of the HECM’s mission
  • Impact of lowered ongoing FHA premiums on the principal limit growth (line of credit)
  • The ‘ruthless’ option

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HUD is soliciting feedback from interested parties until September 29, 2017. Feeback can be submitted to: answers@hud.gov

Official Mortgagee Letter 2017-12 “Home Equity Conversion Mortgage (HECM) Program: Mortgage Insurance Premium Rates and Principal Limit Factors”

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HECM Changes Coming This Fall

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change-pillDespite executive order, more HECM Changes coming this fall

One would think our industry may catch it’s collective breath from the rapid nonstop pace of new rules and regulations for the Home Equity Conversion Mortgage. Such hopes were bolstered with the February announcement of President Trump’s Executive Order curbing federal regulations. However, it appears that HUD’s final rules will in fact be implemented this fall. What do such changes hold in store for the reverse mortgage industry?

Perhaps it is fitting that HUD’s final HECM rule will arrive just days before the fall season officially begins on September 19th. The rollout will come in three phases: self-implementation, changes to the Single Family Housing Policy Handbook, and future mortgagee letters. During the National Reverse Mortgage Lenders Association meeting last week in New York City, the association’s president and CEO Peter Bell expressed their comfort on the direction of the coming rules changes.

Some additional changes are welcomed by industry participants. These include ….

NEW HECM Rules Announced

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HUD Announced New Finalized HECM Rules for 2017

reverse mortgage newsHUD announced their finalized rules enacting several policy changes to the Home Equity Conversion Mortgage (HECM) program which will go into effect later this year. What do these changes hold in store for interest rate caps, disclosure requirements, and new loan assignment guidelines and how will the final rules change the face of reverse mortgage originations? Welcome. This, is the Industry Leader Update. I’m Shannon Hicks.. This episode is brought to you by ePath Digital, providing real-time leads for today’s reverse mortgage professional.

After much anticipation and speculation, HUD announced their finalized rule changes for the Home Equity Conversion Mortgage. The rule changes were first proposed and opened to public comment last May. The rules could be seen as a continuation of the agency’s mission to solidify the reverse mortgage program under the Reverse Mortgage Stabilization Act of 2013 which gave HUD expanded authority to quickly enact additional rule changes as they saw fit. The new rules will go into effect September 19, 2017.

When it comes to reverse mortgage originations, loan officers and lenders will be required to…

Download the video transcript here.

An Identity Crisis for the HECM?

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reverse mortgage newsThe HECMs identity, purpose, and true intent

Anyway you slice it, the reverse mortgage industry is struggling to get back on a positive trajectory. Not surprising considering the glut of regulatory changes and product revisions we have absorbed in recent years. The silver lining is the immense market potential that lies ahead. The uncertainty lies in the question, what will the HECM program look like in the future?

Beyond regulations, product changes and product restriction we face another quandary, a crisis of identity and purpose. Much of the HECM’s identity crisis can be attributed to our traditional needs-based borrower of yesteryear…

Download a transcript of this episode here.

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Sacred Cows



HECM Line of Credit (Principal Limit) Growth Rate in AARP’s Crosshairs

reverse mortgage newsSacred cows. Those tenets or beliefs that have been long held above reproach and which are seen as immune from criticism. For the Home Equity Conversion Mortgage, one benefit has been largely left unscathed, that is until now. AARP is recommending the elimination of the principal limit growth factor, or as many refer to it the credit line growth rate feature.

There are many competing and cooperating opinions that are voiced when HUD makes revisions to the federally-insured reverse mortgage program. Industry stakeholders, trade groups and consumer advocacy groups. While all groups stated goal is to serve the needs of aging homeowners, the proposed policies have profound differences in implementation, and most importantly on the future appeal and accessibility of the HECM to future borrowers…

Download a transcript of this episode here.

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NRMLA Responds to Proposed HECM Changes



A brief summary of NRMLA’s 30-page response to FHA

Collectively as an industry we have endured numerous changes to the Home Equity Conversion Mortgage program in recent years. Two months ago, FHA outlined several proposed changes to the HECM program and received inputs from loan officers, industry participants, and most recently the National Reverse Mortgage Lenders Association.

NRMLA recently submitted a detailed 30-page letter to the Federal Housing Administration regarding the agency’s proposed rule changes to strengthen the federally-insured reverse mortgage program. The document goes into great detail to outline specific concerns of the new rules impact on future borrowers and our industry as a whole.

For the sake of brevity, we will highlight a few notable responses.

1. Lower interest rate caps. NRMLA rightly points out the significant unintended consequences of lowering both annual and lifetime adjustable interest rate caps stating, “various institutional investors have indicated that they would have to cease purchasing monthly adjustable HMBS pools if the lifetime cap was reduced to 5%.” What FHA overlooked is our small fragile secondary market, limits on investor derivatives, and increased consumer costs.

2. Required HECM counseling prior to a sales contract. The HECM for Purchase program while attractive to downsizing seniors, has not met it’s anticipated volume in our industry. FHA’s requirement for prospective borrowers or homebuyers to complete HECM counseling prior to signing a sales contract is impractical at…

Download a transcript of this episode here.

Looking for more reverse mortgage news, commentary, and technology? Visit ReverseFocus.com today

A Change of Heart in Reverse



What changed the mind of one Chicago Tribune Columnist?

reverse mortgage newsIt is admirable to have strongly-held beliefs. It is even more laudable when one changes their position based on new facts and insight. That’s exactly what happened for one Chicago Tribune financial columnist.

“My views on reverse mortgages have become somewhat more favorable”. This introductory quote leads the Tribune’s recent article “Reverse Mortgages Have Improved, but the Buyer Still must beware”. Like many other financial professionals, columnist Elliot Raphaelson believed that reverse mortgages should only be used as a last resort. A belief that was often codified in financial planning organizations like FINRA, which later removed this phrase from their advisories.

Raphaelson fairly points out a historic and reputation-challenging problem, that many individuals…

Download a transcript of this episode here.

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HECM Changes: For Better or Worse?


Do Recent HECM Changes Help or Hurt our Industry & Consumers?



Certainly one could argue that the recent changes to the federally-insured reverse mortgage have improved the reputation of the program in the eyes of financial planning professionals and the media alike. While additional consumer protections are admirable, do the numerous policy changes signal a turn for the better or worse?

man-holding-scaleA recent MarketWatch article “Could the tide be turning on reverse mortgages?” asks just such a question. Columnist Alicia Munnell opens with “after decades of skepticism and reports of scandals, the tide appears to be turning for reverse mortgages”. The New York Times Business section recently led with a story on the ‘revival of the reverse mortgage’.

While there may be a revival of the reverse mortgage in the consciousness of the mainstream media and in the minds of media pundits, our industry is not experiencing a revival but a retraction, as HECM endorsement volumes…

Download a transcript of this episode here.

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The Shrinking HECM?


Challenges to HECM Growth & Measuring Success

Reverse mortgage endorsement volumes have continued their slide after a brief recovery. Despite the increased acceptance of the press and financial planning community and the ever-growing need of soon to be retirees, the Home Equity Conversion Mortgage industry finds itself challenged to grow. Welcome to the Industry Leader Update.

Perhaps we are using the wrong standard by which we measure our industry’s success in reaching age-eligible homeowners. After all, can we honestly say it is an apples-to-apples comparison to compare early HECM volumes with their limited loan qualification guidelines with the reverse mortgage of today?
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Download a transcript of this episode here.

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More HECM Changes Coming…

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More Changes for HECM on Horizon from HUD

looking-aheadIf you think the dust has finally settled in the wake of numerous HECM changes, think again. HUD announced their intention to codify recent program changes while also adding new consumer protections to the federally-insured Home Equity Conversion Mortgage program.

Sit down, take a few Tylenol along with a pot of coffee and settle in to read HUD’s proposed rule changes. Perhaps a better approach is a brief summary of the proposed rule changes presented here in the next few minutes.

First, HUD reiterates their first-year distribution limit as 60% of the principal limit or the total mandatory obligations plus 10%. What’s new is the forward commitment that the initial 12-month distribution cap is never to be less than 50% of the principal limit. Keep in mind that principal limit factors can be changed outside of the rule making process via a mortgagee letter as market conditions warrant.

Second: H4P changes. HECM for purchase borrowers must complete HECM counseling prior to signing a sales contract or…

Download a transcript of this episode here.

Looking for more reverse mortgage news, commentary, and technology? Visit ReverseFocus.com today.