Previously, FHA-approved lender branches were restricted by states where they were able to operate. A licensed originator working for an FHA approved lender could only do business in the state where his or her office was located and the states that shared its borders. Now, however, with changes regarding the Single Family Loan Origination Lending Area requirements, lenders are subject to the same rules as non-approved brokers, and can operate in any state where they are licensed.

It levels the playing field between lenders and brokers, says Bill Trask, executive vice president/general counsel for Security One Lending.

“It’s a big thing for some of our branch recruits,” Trask says. “It opens up some doors for us, because in the past [those branches] were limited geographically.”

Effective immediately, HUD has made some modifications to lender approval requirements as well as lender operational requirements, including some specifications regarding FHA loan officers, mortgagee owners and office facilities, branch arrangements, DBAs, and others.

Among the changes, approved mortgagees may not engage in “net branching,” and must pay all expenses incurred in the operation of their home, branch and direct lending offices directly. Expenses may not be paid by anyone but the approved mortgagee.

Additionally, HUD redefines the terms “corporate officer,” for which lenders must provide name, credit report and resume in accordance with the HUD Handbook, as well as “owner” for various company types.

For company names, HUD states that lenders are allowed to register up to six “doing business as” (DBA) names per home office or branch, and that any DBAs beyond six be registered with FHA with documentation authorizing their use.

View Mortgagee Letter 2011-34.

Written by Elizabeth Ecker

The White Plains, N.Y.-based mortgage company says the time is right for a reverse-specific division due to uncertainty in housing markets and general economic volatility. While the new department will promote positive aspects of reverse mortgages, the company says, it will also attempt to dispel some of the more “pernicious” rumors about the products.

“Our decision to create a separate department for reverse mortgages is based on the many unique qualities of this product and our desire to provide expert advice both for consumers and our branch locations who request support for these loans,” said Guaranteed Home Mortgage President and CEO David Wind. “In addition to advice, our corporate office will provide marketing documents and region-specific instructions on how to successfully structure reverse mortgages to achieve homeowners’ retirement goals.”

Retail Product Manager Anthony Mannino will run the division from Guaranteed’s Farmingdale, N.Y. location, and he says his team of loan officers aims to grow their reverse mortgage business nationally.

“We understand that it’s not an easy product to understand, and we excel in those environments where education is needed,” Wind said. “You can throw a huge marketing campaign, but in the end it’s about the boots on the ground.”

Guaranteed was founded in 1992 and has originated and brokered reverse mortgages since close to the HECM program’s inception. According to data from ReverseBase, the company closed 36 reverse mortgage loans last year and 65 in 2009.

Written by Elizabeth Ecker

Peace of Mind (or “POM”) Escrow Services, a Chicago-based division of National Tax Search, LLC has developed a third party bill pay service to help HECM borrowers manage the payment of property tax and homeowner insurance.

POM Escrow is working directly with the Reverse Mortgage Counseling Association to provide the service to borrowers as well as introduce it to the reverse mortgage industry.

The service also aims to quickly address cases where a borrower is having difficulty making tax and insurance payments, essentially raising a red flag earlier in the process.

While the company uses the term “escrow,” the service is more in line with a bill-pay option that existing and new borrowers will have, explains Lori Eshoo, who founded the company after many years operating National Tax Search, a property tax management company.

Lenders can’t offer escrow accounts directly under HUD guidance, but the service could be a good solution for the right borrower, say some lenders.

Michael Cullen, senior vice president, reverse mortgage lending, wholesale and correspondent, for Bank of America says he first looked into the service when he saw the need from seniors who were not making their tax and insurance bills.

“It’s a problem for the industry and the product,” he says. “The worst thing we can do is foreclose.”

A report from the Department of Housing and Urban Development OIG found there are nearly 13,000 such loans in default as of August 2010.

Even if the service is used on a cyclical basis, Cullen says, it could be worthwhile for borrowers who find themselves having difficulty keeping up with the payments.

“Even if it’s only a three year solution, a lot can happen in three years. The senior will be older, we hope the home will be worth more…the industry needs an escrow.”

POM Escrow, while not connected directly with the servicer, would run escrow analysis, determine tax and insurance payments, and start collecting from the borrower on a monthly basis, for a fee, Eshoo explains.

“Many of these borrowers don’t live in the same place for 12 months,” says Eshoo. “It’s hard to keep track of when the bill is coming, when is the due date, and to have to manage whether taxes are increasing or decreasing. We’d manage all that and make sure the bill gets paid timely.”

Eshoo says POM Escrow has received interest from several large lenders and is in the process of working with counselors to inform them of the service, with plans to launch June 1 and a starting pilot with several counseling agencies with a goal of June 15.

Borrowers will face a setup fee and monthly service fee, with the option for contracted terms, and can work with the service through a secure web-based system easily accessed by both the homeowner and lender.

While the Department of Housing and Urban Development is aware of the product, it has not endorsed the product officially.

Eshoo says while HUD rarely endorses private products, POM hopes that once the product gains more traction, HUD will respond positively.

“We hope that once we show the positive interaction between the borrowers, lenders and ultimately the solution to defaults to HUD, they will have more of an opinion in a positive manner,” she says.

Written by Elizabeth Ecker

The waiver is related to requirements set forth last year in Mortgagee Letter 2010-20 as part of the FHA single-family mortgage insurance program risk management reforms. The waiver will expire on April 7, 2012, according to the email correspondence sent out in mid-April.

The reporting threshold, according to HUD, is derived from Federal Deposit Insurance Corporation, Office of Thrift Supervision and National Credit Union Administration regulatory requirements.

HUD’s email correspondence specifies that the waiver applies to the submission of audited financial statements only, and does not apply to the requirement that supervised lenders submit an independent auditor’s opinion of internal control and compliance with HUD programs. The waiver was sought by the National Council of State Housing Agencies in comments to HUD in late December 2010.

FHA has indicated that a forthcoming mortgagee letter will provide additional information.

View the communication from HUD.

Written by Elizabeth Ecker

The Clarity Commitment is a one-page loan summary which presents borrowers with their interest rate, terms and other details of the loan in plain language says the company website.

Provided to consumers at both application and closing, the document includes information about counseling, servicing, and insurance fees.  

As we all know, reverse mortgages can be more complicated to explain and the industry could use a simple set of documents to explain the product.  BofA’s Clarity Commitment is a step in the right direction.

Application Reverse Mortgage Clarity Commitment

Closing Reverse Mortgage Clarity Commitment

Ms. Swanson was not happy that the bill was vetoed and wrote an editorial piece for TwinCities.com.  In Reverse-mortgage hype is coming — we’d better be ready, she writes, “With the chill in the real estate finance market, some of the same lenders and brokers who once sold toxic subprime mortgages are now aggressively pitching reverse mortgages to our senior citizens.”

Swanson adds that federal policy makers have taken action in recent years to “push” the sale of reverse mortgages.  Her evidence is that last year Ginnie Mae began developing a secondary market for reverse mortgages and refers to a speech given by one of its executives at a conference.

Her reasoning for drafting the bill was in reaction to what happed in the mortgage industry over the last year.  She fears that, “Bad reverse mortgage lending practices will bring catastrophe to the individual senior citizens who deserve better than to have their nest-eggs pilfered by high-pressure sales tactics.”

She adds, “the bill is measured in approach and it does not interfere with a healthy, productive free market. It would, however, protect senior citizens from fraud and abuse.”

Ms. Swanson, all of us in the industry want to protect seniors as well, but calling your bill a “measured” approach just isn’t true.  When you state that the bill doesn’t interfere with a healthy, productive free market… you’re wrong.

If passed, the bill would’ve driven up the costs of the loan for all seniors and possibly driven lenders to stop offering reverse mortgages in Minnesota.  How you missed this is beyond me, but luckily, Governor Pawlenty vetoed the bill and now you can take the time to learn about reverse mortgages and do what you originally set out to do… protect seniors.

Reverse-mortgage hype is coming — we’d better be ready

Currently the product is available to a select group of brokers in order to fulfill its commitments to Ginnie Mae, but they plan to open it up widely mid to late June said a company statement. 

Companies like MetLife and Generation are able to offer extremely competitive fixed products using Ginne Mae’s HMBS product due to investor interest from Wall Street.  Rate sheets that I’ve seen show rates are almost 1% better (lower) when compared to lenders delivering fixed rate products to Fannie Mae. 

However, Ginnie Mae’s pricing advantage comes with some additional risks to lenders.  “The biggest concern is that Ginne Mae requires the loan to be repurchased out of the fund when it hits 98%, and if the loan is in default for taxes or insurance, HUD won’t take it,” said Sherry Apanay, Senior VP of Generation Mortgage. 

This creates a problem for non-bank reverse lenders who don’t have the ability to hold the loan on its balance sheet until it pays off.  Sources tell RMD that there continues to be discussions between potential issuers and Ginne Mae officials to see if there is a way to restructure the program to ensure non-bank lenders can compete.

Often appearing as if it is coming from an official (i.e. government) source, the appeals offer to help unsuspecting recipients – usually seniors – take the necessary and proper steps to obtain this specialty financial product. “It is a source of concern,” says Peter Bell, president of the National Reverse Mortgage Lenders Association, who notes that the mailings “are not coming from lenders, but lead generation companies that don’t understand the product.”

He adds that the most common mailings “are impersonations of government agencies [which are] not stating that HECM/reverse mortgages are a loan program. There was a wave of them a year ago, when the new loan limit was announced.”  Earlier this year, ABC 7 San Francisco ran a feature on lenders using these types of mailings.

Industry journalist Jerry Demuth has discovered that HUD lumps all mortgage-related complaints together, “so there is no category specifically for reverse mortgages,” he reports exclusively for RMD.

“The FTC may not even have a category this ‘narrow’,” Demuth points out, noting that according to an FTC media person, the agency “can’t reveal anything [re: complaints], even just numbers, let alone anything on types of complaints, because [it says] all information is ‘nonpublic’.” What’s more, he discovered that since October 1, 2007, HUD has sent notices regarding misleading ads to nine lenders, telling them to stop and to change or eliminate the misleading portions of their ads. The occasional repeat offender reportedly has received civil money penalties, Demuth reports.

Neil J. Morse has been a communications professional working in the mortgage finance industry for more than a decade, currently specializing in the reverse mortgage sector. He can be reached at nmorse@morsecommunications.com

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