A “new” reverse mortgage borrower has emerged, and Reverse Fortunes’ latest podcast talks about just what that borrower is looking for, in light of recent comments made during a congressional hearing on the FHA’s reverse mortgage program. Additionally, Reverse Fortunes’ Shannon Hicks discusses potential changes to loan officer compensation rules that may be upcoming, based on an outline from the Consumer Financial Protection Bureau.

Hicks also talks about the CFPB’s response to industry comments in the LO comp conversation as well as a recent article from CNBC that told readers about today’s options for trading their home equity for incoming payments. .

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Talking Points:

• A New kind of borrower?
• CFPB shockwaves from LO comp?
• We are listening (CFPB)
• Trade bills for money

Listen now. “Reverse Fortunes is the ultimate resource for reverse mortgage professionals providing the technology, training and marketing to grow your business. We are your one-stop resource for those committed to taking their business to the next level.” Editors Note: These posts are sponsored by Reverse Fortunes.

Some discussion focused on the “reshuffling” of lenders and originators as well as the opportunity recent change has presented, NRMLA shared with RMD. 

“There’s been a reshuffling of the cards and those companies that remain have a new hand to play, a new opportunity,” said NRMLA president and CEO Peter Bell during an opening conference session. 

Karin Hill, representing HUD’s office of single family, shared the department’s current outlook on the Home Equity Conversion Mortgage program. 

“Is the program stabilizing?” asked Hill, Director of Single Family Program Development. “That’s a good question to ask. I think we have been very successful at identifying the problems we need to address on an ongoing basis.”

Hill estimated financial assessment and credit guidelines would be issued for comment in four to six months.

Lenders also heard from financial planning professionals, as well as Barry Sacks, the author of a recent study on reverse mortgages and their use as a retirement planning tool.

“The conventional wisdom has been taking a passive or let’s-wait-and-see approach to using home equity as a retirement planning tool,” said Sacks. “But we think a better approach is an active strategy where you do not wait for negative or poor portfolio results to turn to home equity products.”

Sacks’ research, co-authored by his brother, Stephen, was published in the Journal of Financial Planning in March, sparking interest among industry professionals. But there are still hurdles in working with financial planners, conference panelists said. 

“Many seniors still feel like if you take out a reverse mortgage, you have failed. It’s the last trip to the well” said Pat McClain of Hanson McClain speaking on a conference panel. “But that changes with time. It has taken me as long as five years to get people to come around to considering reverse mortgages. One woman said to me, ‘I would never take a reverse mortgage,’ and I sat there thinking, ‘That’s what you think. I know your numbers.’”

Written by Elizabeth Ecker

This would allow private reverse mortgages to be securitized and originated without that requirement. 

“We are requesting [the CFPB] create a definition of a qualified mortgage under its [Ability to Repay]-QM rule to assure that reverse mortgages, other than FHA-insured HECMs, have an opportunity to qualify for an exemption from the risk retention requirements,” said Peter Bell, president and CEO of the National Reverse Mortgage Lenders Association, during testimony presented before the House Subcommittee on Insurance, Housing and Community Opportunity.

The CFPB is currently working on a QRM definition—a hotly debated concept among mortgage industry participants.

“Having a specific definition of a “QM” for reverse mortgages will help facilitate the return of a conventional market with proprietary products,” Bell said. “Our recommendation is that reverse mortgages that are either FHA-insured, or meet the guidelines of the FHA HECM program, should be deemed to be a qualified mortgage for purposes of the ATR-QM rule.”

Written by Elizabeth Ecker

A Congressional hearing took a close look at reverse mortgages. A hearing before a House Financial Services subcommittee included testimony from NRMLA, Generation Mortgage, reverse mortgage counseling agencies, academics and AARP. Not too many surprises, but AARP did urge Congress to lift the cap on the number of reverse mortgages that FHA can insure. 

CFPB said it’s taking a crack at mortgage origination rules. The agency outlined changes it expects to make regarding the points and fee structure currently used by loan originators, as well as new screenings and requirements for all originators, bank and non-bank. 

A local Fox News segment showed a new outlook on reverse mortgages. In the segment, featuring a Q&A with Atlanta real estate expert John Adams, Adams says his mind has been changed on reverse mortgages over the past few years. 

In hiring news… 

Puerto Rican lender Moneyhouse announced the hire of former Urban exec Sandy Tennekoon. Tennekoon will head up the company’s wholesale lending arm, as well as its expansion into the U.S. 

Generation mortgage hired HUD’s Colin Cushman as chief of risk and strategy. In his work at FHA, Cushman is credited largely for his work on the creation of new reverse mortgage products, including the HECM Saver. 

Written by Elizabeth Ecker

“Our nation’s demographic and economic trends suggest that the reverse mortgage market will continue to grow,” said Peter Bell, NRMLA president and CEO. “This data further validates that reverse mortgages are a fundamental tool to help fund longevity at a time when many Americans might face limited options.”

The index showed a stabilization in the fourth quarter, as total home equity rose 0.9% due to a 0.6% increase in home values and a 0.3% decline in mortgage debt, Risk Span and NRMLA report.

While aggregate senior home values are still 15% below their peak, the 0.6% uptick may be a sign that markets appear to be stabilizing, RiskSpan Chief Operating Officer Allen Jones told RMD.

The reverse mortgage market shows potential for growth based on the data, NRMLA said.

“Many seniors face the possibility of losing their homes based on a shortfall in cash each month and the reverse mortgage can be a great financial solution,” Bell said. “Home equity is a key component to financial prosperity for American seniors.”

Written by Elizabeth Ecker

The introduction of the securitization portion of the conference drew investors and HMBS traders to discuss issues such as marketing challenges and securitization of the Home Equity Conversion Mortgage (HECM) Saver.

“It’s important to shed light on the securitization process because that’s where the capital comes from that drives this business,” said Peter Bell, NRMLA president and CEO. “Some people might not understand it, so it’s good to create conversation around it.”

With a higher-than expected turnout and panel topics ranging from baby boomer marketing to policy, fraud prevention and corporate social responsibility, the conference also featured conversation with Federal Housing Administration officials in support of the HECM program.

“There is enthusiasm for the HECM product,” said Karin Hill, director of HUD’s Office of Single Family Program Development. ”HUD totally agrees with the importance of this product and we know there are a number of things we need to do to make sure the product is sustainable and is effectively being managed.”

Additional discussion covered development of a reverse mortgage financial assessment toward reducing tax and insurance defaults and marketing the HECM Saver and Purchase products. The overarching issues, however, relate more closely to the political climate in Washington and the economic health of FHA, Bell said.

“The biggest issue is the political environment and the future of FHA. It’s not a HECM issue,” he said. “We have an administration budget fairly supportive of HUD and a house budget committee that looks to cut HUD and other agencies back further than the administration. Any discussion now is inconclusive.”

Written by Elizabeth Ecker

In an effort to work with the Consumer Financial Protection Bureau and its overall initiative to revamp all mortgage disclosure forms under a Dodd-Frank rule to combine the Truth in Lending form and the Good Faith Estimate into one form, NRMLA is in the process of creating a draft of new mortgage disclosures that are specific to reverse mortgage borrowers.

The next step for the proposal by NRMLA will be to make it available for industry comment before sending it to the CFPB for input.

“This is good news,” NRMLA counsel James Brodsky told conference attendees Monday, noting the complex forward process and distinctions between forward and reverse borrower needs and complexities. “This is recognition from a sophisticate regulator to appreciate that one size does not fit all.”

The draft has yet to be approved by the NRMLA board, but the association has a rough draft that it will distribute soon. The current draft is a four-page document that includes loan elements and calculations including a clear statement that the reverse mortgage is a special type of loan. It indicates loan terms, payment of proceeds and calculation of available loan proceeds. Additionally, the borrower will see intended disbursement, any payoffs, loan balance projection and total annual loan cost rate.

“It is a work in progress,” Brodsky said. “It seems a hopeful sign that the Bureau wants help. The NRMLA team is being quite thoughtful as it works its way through the process.”

The CFPB has undertaken an extensive process on the forward side, which it calls “Know Before You Owe.” Through a series of drafted documents released for public comment, the bureau is in the process of honing in on a final disclosure form under the Dodd-Frank mandate to create a single disclosure form.

Written by Elizabeth Ecker

The potential comes after the NRMLA board held recent meetings in Washington, D.C. with White House economic policy staff, Peter Bell, NRMLA president and CEO told conference attendees.

“It was an exploratory meeting to see what they know about reverses and to feel out their interest. One outcome was we discussed the concept of working with [the Department of Housing and Urban Development] to develop a hybrid reverse mortgage,” Bell said.

The hybrid would combine an initial fixed rate option upfront with a variable rate for future draws on the loan.

“We feel this would be better for all concerned,” Bell said. “It would be better for consumers and better for the FHA fund.”

The reception was positive, he said, with a considerable degree of interest for pursuing the new product idea at the White House, which could work in turn with HUD to develop the product.

The Saver reverse mortgage, developed by HUD and launched in late 2010, is an example of a similar product developed as an alternative to the “standard” reverse mortgage products currently offered by FHA.

“The Saver is a model for what can be done,” said James Brodsky, legal counsel for NRMLA, noting the interest and enthusiasm from a presidential advisor as to how a new reverse mortgage product could fit into the administration’s plans.

Written by Elizabeth Ecker