Minnesota’s Reverse Mortgage Legislation Continues Moving Forward

As more and more states are proposing reverse mortgage legislation I wanted to give everyone a better idea of what is happening in Minnesota.  S.F. No. 489 was introduced by Minnesota Attorney General Lori Swanson and other politicians to prevent reverse mortgage lenders from taking advantage of senior citizens.

Below is a video of testimony from a range of  people including Carla Heyl Assistant MN Attorney General, Darryl Dahlheimer of Luthern Social Services, Christeen Stone an AARP volunteer and Beth Paterson of Prestige Mortgage, Reverse Mortgages SIDAC who has testified at all of the hearings mentioned in this post. The bill approved and was sent to the Senate Judiciary Committee.

Fast forward to the Minnesota House of Representatives Committee on Commerce and Labor and Consumer Protection Division last week.  AARP’s executive councilmember Shirley Hunt Alexander read the following statement which you can read here.  Below is a couple snippets (AARP put specific words in BOLD):

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  • We support the suitability clause – intended to ensure that reverse mortgages are sold only to people who need them.  Lenders should be held responsible for selling loans that they know are bad for the particular consumer.
  • We also support the prohibition of cross-selling.  Too often, the home equity of borrowers is depleted because they are offered inappropriate financial products, such as annuities or long term care insurance.  Consumers should be wary of anyone who tries to sell them something to be paid for with a reverse mortgage.  If anyone is trying to sell you something and recommending you use a reverse mortgage to pay for it, that’s generally a good sign that you don’t need it and shouldn’t be buying it.
  • We also support the mandatory counseling provision of the bill; and are pleased that the timeframe in which consumers can reconsider their loan is expanded.  We are also pleased that the bill increases the responsibility of lenders so that the originator and the buyer of the loan can both be held responsible for any unscrupulous actions by the loan originator.

If you would like to see a video of this session, click here.

Next it moved on to the House Labor and Consumer Protection Division.

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  • Just to clarify, Darryl Dahlheimer was representing Lutheran Social Services who does reverse mortgage counseling – they are on the national list of counselors. This is not RMD’s error as the statement that went with the video listed it as a company who does reverse mortgages.

  • This is the first time I’ve read about reverse mortgages… But even without that, one of the statements in your highlights caught my eye in particular. “Lenders should be held responsible for selling loans that they know are bad for the particular consumer,” that pretty much sums up how loans should be, reversed mortgage or not.

  • Are you serious?

    Do you really think not allowing anyone with an insurance license to originate reverse mortgages will stop cross-selling? I’ll answer that one for you…no.
    People will always find a way to cheat.

    Here’s the real problem I have with your proposal to prevent insurance agents from originating reverse mortgages Cynic:

    1- it assumes an insurance licensed individual cannot be trusted to follow the law,
    2- it won’t solve the problem and
    3- it removes financial professionals who are just more than lenders from the scene to the detriment of seniors.

    Experienced insurance professionals have a broad depth of knowledge on retirement planning, pension benefits, taxable income, asset allocation and suitability. Why remove such people from the reverse mortgage business?

    The sad fact is very (VERY) few reverse mortgage originators ever take the time to fact find. They should find out the client’s income, monthly expenses, what assets they own, if they pay federal taxes, retirement income, etc…etc… Many only fill out the 1009 or application and consider that “fact finding”.

    Here’s the ironic twist: the few originators I know who do a financial fact finder or suitability assessment of their clients are former or currently licensed insurance professionals! What you are not told is insurance professionals often do more complete fact finding and suitability screening than some originators who merely function in the mode of “order taker”.

    Not all originators fail to fact find, but many need to step up their overall knowledge of retirement planning since in fact the reverse mortgage is a retirement tool.

    On another note, AARP’s comments completely sidestep the proposed 30 day rescission period. Either way, if lawmakers extend or begin the recision period at the signing of closing docs, lenders will not release one red sent to the borrower or funding until that period has passed.

    Extending the cancellation period is another pointless do-gooder provision that would only hurt the senior and delay their access to funds or maker lenders reluctant to offer the reverse mortgage in their state.

  • Good morning,

    I understand what is trying to be accomplished for the protection of our seniors, I agree with some of what has been said in this video.

    However, you can’t determine what a “Need” is for the senior. It could be to improve their quality of life, not a last resort tool. We live in a different world today. Many seniors live in areas where they don’t have family near by and they want to remain independent as long as they can. Seniors are getting reverse mortgages for many reasons, how can you tell a senior a reverse mortgage is bad for them if they are not on poverty road?

    Predatory lending is a whole different issue, we NEED and MUST separate predatory lending from what a reverse mortgage can or can’t do.

    We that are experienced in the Reverse Mortgage industry and have the seniors best interest at heart do a great job for our seniors. Yes, many seniors are needing reverse mortgages to take them out of debt or give them the extra income they may need to live a better quality of life. Our economy is a mess, we have ourselves to blame for that. Many seniors are suffering today because of loss of retirement funds, cost of goods increasing, you name it.

    Lets say we have the senior that is doing very well financially and may own their home free and clear. What I am hearing in this video is that a reverse mortgage is a BAD thing for these seniors, WRONG! Maybe, just maybe, we have a senior that wants to use their home for leverage. A senior may want to buy a $250,000 Boat, and they may want to take out a reverse mortgage (Tax Free Money) so they can buy the Boat for cash. What we have hear may be a smart senior. A senior who now has the $250,000 boat, free and clear, no payments on the Boat and no mortgage payments on their Home, all because of the reverse mortgage. To top it off, this senior was an accountant all his life! Are you going to say this was a BAD thing for the senior to do, I don’t think so?

    It is apparent by listening and seeing this video, one would think a Reverse Mortgage is a bad thing. This is out right untrue! We need to focus on the lenders and loan officers that are perpetrating fraud on our seniors. I am 100% for that. We need to look toward HUD to enforce laws and crack down on complaints and predatory lending. A lot of what legislators try and do is eliminate a program rather than cure the problem. This is happening more and more in our country because of the inefficiency of staff in many of our Governmental departments. The Reverse Mortgage problems are NOT with the loan but with some of the lenders selling the product. This is one time we need our Government to take control, not the states. We can’t have different rules and regulations in each state, it would be a nightmare to control and administrate.

    We must NOT make the public think a reverse mortgage should only be used as a last resort, the young lady that made this statement in the video is wrong and is doing our senior homeowners a grave injustice. Some of what these legislators are trying to may destroy a valuable source of funds for our seniors to be able to survive. Fear is what this video portrays, seniors need to be cautious but not scared to venture into something that may allow them to live a normal life.

    Best regards,

    John A. Smaldone

  • Has anyone heard from the lenders? What do they have to say about a longer rescission period?

    Also, since when is the legislature, ie. government responsible for how a home owners spends their own money? If using your equity to finance a lifestyle or other dreams is bad for seniors, how does that reflect on HELOC’s?

    And since when do seniors need such over protection? These are citizens who raised families, built businesses, ran for office, taught the legislators who are now trying to run our lives, and so forth. I trust my clients to make the right decision for themselves with the right information and counseling. The small percentage of fraud in reverse mortgage industry is far outweighed by the forward mortgage industry fraud. Does the attorney general know that forward mortgage fraud is still happening in her state? Let her focus on that battle and let HUD police the reverse mortgage industry.

    Thanks for listening,
    Dory Lidinsky

  • Being a Senior and experiencing many of the same aging
    and simple pressures of just living, I can assure anyone sometimes the only reason to put a FHA HECM in place is to protect against the unforseen. Seniors, seemingly in good health, can have an adverse health incident at any time. Whether one is 62 or 92, having a Line Of Credit from an FHA HECM is a Godsend. Annuities are the only form of insurance I object to–
    an actuarily growing Line of Credit of unused funds is sufficient in itself. Life Insurance, however, is used to guarantee a younger age wife will be able to pay down the debt to qualify for an FHA HECM herself, sometimes: I reccomend but don’t sell. When there are already issues of poor health, devastating credit card debt, or simple cost of living or home maintenance, the neeed and appropriateness of an FHA HECM is axiomatic. I know I harp on placing the interests of Seniors first in our work, but there is a reason. I critisize some of you for hiding behind an alias: It’s because I believe one ought to always be honest open and upfront in every action one takes. This IS a SPECIAL industry–HELPING SENIORS IN THE LAST DAYS OF THEIR LIVES. Most of the people who work in this industry ARE SPECIAL, TOO. Real life FHA HECM stories just have to be publicized ; it is imparative.

  • James,

    Even though I’m using an alias (and I’m fine with that), I do agree with much of what you say.

    I would even go a step further and point out another reason seniors get a reverse mortgage is to protect against the loss of the smaller social security check when one spouse passes away or a reduced pension payout to the surviving spouse.

    One thing to be careful about when describing the line of credit. It is not an “everlasting gobbstopper” of money. The line of credit will grow, but only up to the original principal limit. This can be found reading the HUD regulations for the HECM loan.

    I’m also against the cross selling of products (especially annuities), but in some cases the senior would be better served working with an outside professional. Why, because the HECM’s tenure payment has limitations and may stop once the borrower reaches their life expectancy…unless they began with a full tenure payment and never changed the plan. In other cases the client wishes to have full control of the equity in a separate account rather than risk the loss of the line of credit or equity in a declining real estate market if they sell the home some years later.

    It all sounds innocent enough and in most cases protects seniors to not allow cross selling of financial products. But the clients may want to look to an external financial planner when considering some of the risks mentioned above. The real risk is shifted off the back of the senior and onto FHA with the more equity they separate, not to mention there TALC costs go down dramatically.

  • Interesting, S.O.P., that you would mention “Financial Planners” (And I know there are some really quality, very knowledgeable people in the Profession.) When I did my FHA HECM Counseling the other night, (which was illustrative– I always wondered what was really said and how) I was told by the Counselor that HUD now requires Counselors to inform Seniors it is not a requirement that one hire a Financial Planner to review the Senior’s assets. Apparently, some in the Reverse Mortgage Industry have been making that statement. I had never heard of this problem before. Wonder how prevlent this tactic is?

  • Has any one checked to find out what it cost to recive a conventional loan? Also pray tell me how much can I borrow to supplement my income based on my socail security income? Since when because I am a senior I don’t know how to manage my money and wpuld like to enjoy my senior years. I don’t see the family taking care of thier parents but will come vist grandma if she sends them money for air line tickets and take them ut to fancy resturants. I’t time to stop trying to run our lives. Generally reverse mortgage take 3 t0 6 weeks and a senior can cancell any time they want. Many who have mortgages need to pay rthem off before the next payment is due.
    I am sick and tired of people telling me how costly a reverse mortgage is most seniors in todays market have only paid out of pocket $75 for cousling and 350-400 for the apprasil which both of these can be financed.
    I have done many people who have taken out 300,000 on a house that when they sold it it was worth 200,000 and they now have 100,000 in the bank.Many are dancing in the streets. Where is the protection of family owned business turned over to the family which was the parents retirement fund only to have gone down the drain by the familly.
    Stock brokers have a rule you don’t borrow money to invest same rulle should apply to insurance products.
    Why invest in an annuity when a reverse mortgage is an annuity.
    A reverse mortgage is a simple product made complex.
    It’s a loan where you can take all the money or receive monthly payments or both. You can pay back now or pay letter. Yur charged intrest and closing cost like most loans. you can establish a credit line to draw money in the future regardless of value of home going down.
    Many seniors are enjoying thier years and are being treated as children who don’t know the meaning of money. Let us live and enjoy our life.

  • Good day once again,

    I have read many comments on this issue. I still stand hard and fast on the comments I made which is in number six (6) above. The issue is about what the state of Minnesota is taking action on. The speakers in the video have made comments that are very good but many of the comments are damaging. If the state of Minnesota passes the proposed legislation in its entirety, this will damage the Reverse Mortgage industry beyond repair.

    I do not know what the position is on the part of the Reverse Mortgage Daily Post. I hope the position will be to fight the proposed legislation in its present form.

    Thank you,

    John A. Smaldone

  • Hey S.O.P,

    Are you sure that the HECM line of credit cannot grow beyond the principal limit? I had a client that took a reverse mortgage a few years ago and never spent a penny. She had money, but was running out quickly. She had in-home health care, and as we all know, that gets very pricy. Anyways, she took a HECM and left everything in the LOC. She didn’t touch it for a few years and it continued to grow. From what you are saying the LOC would have capped out after she had recovered her closing costs, but it did not. Secondly, the ammo table in the HECM application shows the LOC growing well over the principal limit as well. Are you sure you don’t mean the max claim as the cap? Interested to hear your thoughts. Anyone else, feel free to comment as well. I want that cleared up.

    As far as the leglislation goes, it will really hurt the seniors more than anything. Speaking from a lenders point of view, we will just stay out of Minnesota and do business in the other 48 states. I say 48 becuase after California is done with its leglislation it will be down to that. We are an extremely reputible lender. but we just don’t want the headaches. Anyone else planning the same? Who needs Minnesota? just kidding!

  • ScaredOfPoliticians, you got one thing slightly wrong in your post, just clarifying to help all readers, not as a negative remark.

    The line of credit grows until it reaches the CURRENT principal limit at that time. The principal limit itself has a built in growth feature, the definition of which I quote below, directly from the HUD HECM Handbook:

    B.The principal limit increases each month by one-twelfth of the sum of the expected rate and the annual mortgage insurance premium (MIP) rate of 0.5%.

    This growth feature is what the Service Fee Set Aside growth, tenure & term payment growth features are all based on, & is an integral part of the HECM program.

    As far as the article itself, I strongly concur with various posts made on this overall topic that a patchwork of state laws only makes the HECM more complicated & difficult for prospective borrowers, originators lenders & everyone else. Just look at the many restrictions that have come, gone & still exist in Texas as one case.

    National regulations for a national program seem best in my opinion. Although I do very vehemently support state level licensing & oversight of originators.

  • Well said, Critic! We all forget that there were many proprietary reverse mortgage products that are and were not regulated by HUD. The private sector will make things interesting in the near future.

  • Dear Critic,

    You make some valid points. However, do you feel we would be doing the industry and senior citizens justice is if we had, as an example, 50 states having 50 different guidelines or rules and regulations for Reverse Mortgages? I know I am exaggerating when I say 50 states. Even if it was 20 states with different rules, it would be a nightmare.

    I am the last person that wants to see the Federal Government involved any more than they have to. However, what makes you think that 50 states are going to be able to control the Reverse Mortgage industry.

    Do you honestly believe that 50 different states are going to think a like and be able to monitor the RM lending practices any better than HUD or our Federal Government has, I don’t think so.

    Each and every state has their own agenda, their own set of problems and their own way of thinking. You are now talking about having more people involved and more bureaucrats than we could ever imagine. Tell me, how many legislators and state officials do we have in 50 states compared to the amount we have at the Federal level.

    You say state government is a part of life, I fully agree with you and I encourage more being left to and more given to the states. In fact I am saddened about what I foresee in our future. I see major problems ahead and see less control by the states and more and more control by the Federal Government, more than I will see in my life time.

    We are on the same side in much of our thinking but not when it pertains to the control of the Reverse Mortgage industry and its seniors. As I said in my comment in number six (6), we need to enforce our laws, rules and regulations that we have within HUD/FHA.

    The states have individual licensing laws that govern the mortgage brokerage industry, that is what needs to be strengthened and enforced. You will never convince me that all of our states as a whole can either design a Reverse Mortgage or control the product. The real issue here is predatory lending, why not focus on that!

    You are right, in 2007 and 2008 we had many proprietary Reverse Mortgage programs in the industry. Yes, they were under the control of HUD and FHA and yes they were not monitored well. The entire mortgage industry has not been monitored properly for 20 years, what else is new. Each state was just as much part of the mortgage industry problems as the Wall Street firms, FNMA, Freddie Mac, our Federal Government and the American public. The states allowed sub prime product, they allowed option Arms, and they could not control predatory lending. I could go on and on. As far as the design of the HECM product, the states and the AG’s need to stay out of that.

    This is the exact point I am trying to make. If the states get involved with Reverse Mortgages, you will find states wanting to design their own RM programs. At least with the HECM under HUD and FHA we have a uniformed product with the insurance to benefit the borrower, the lender and to make it saleable in the secondary market. Now Mr.or Ms. Critic, do you also want the states to deal with the secondary market as well, I do NOT think your answer to me would be yes

    I think I went on long enough with my reply to your comment. But what the states do NOT realize is the big picture dealing with mortgage products and trying to design products. This is no better than what FNMA did with their special negotiated deals desk. I am sure you will be commenting on my reply, I will look forward to it. Thank you for your frankness and your opinion, I do appreciate it.

    Best regards,

    John A. Smaldone

  • Kid Reverse,

    Great question!

    Here’s where I found the information…. in the application / loan docs.
    Check this out (kind of scary):

    Basically one could make the case either way: the LOC grows with no cap with the Principal Limit or the LOC grows only up to the initial.

    Below are my citations. My apologies for the length.

    Home Equity Conversion Mortgage Disclosure
    (Application Truth-In-Lending Disclosure)
    Important Terms (found on page one)

    We can refuse to make additional extensions of credit during any period in which the following are in effect:
    • The outstanding balance equals the credit limit (“Principal Limit”).

    HOME EQUITY CONVERSION MORTGAGE
    FEDERAL LOAN CLOSING TRUTH-IN-LENDING
    DISCLOSURE STATEMENT
    (under possible actions)

    We can refuse to make additional extensions of credit during any period in which the following are in effect:

    * The outstanding balance equals the credit limit (“Principal Limit”).

    ****The real question is this referring to the initial Principal Limit of the Principal Limit as it grows as described below?

    HOME EQUITY CONVERSION LOAN AGREEMENT

    1.7. “Principal Limit” means the amount indicated on the attached payment plan (Exhibit 1) when this
    Loan Agreement is executed, and increases each month for the life of the loan at a rate equal to one-twelfth of the
    Mortgage Interest Rate in effect at that time, plus one-twelfth of one-half percent per annum. The Principal Limit is
    calculated using factors provided by the Secretary, which take into account the age of the youngest Borrower, the
    Mortgage Interest Rate, and the Maximum Claim Amount.

    *******I think HUD would do well to issue a clarification letter on this topic to insure we are all giving accurate information to our clients.

  • Some answers to posted questions.

    Not all insurance agents are qualified as “outside advisors”, however some are. An insurance license in itself is agreed, not much of a qualifier to act as an advisor. That being said, many experienced licensed agents (most securities brokers are life licensed) build there practice around fact-finding.

    My point was to prevent those licensed individuals from originating would remove many with a strong working knowledge of retirement and fact finding. I would argue again that most originators do not do sufficient fact finding with their clients. I would also say that most insurance licensed individuals know much more about retirement planning and fact finding than your typical reverse mortgage originator.

    Why is fact finding important? Suitability. If they pass these laws holding our feet to the fire and holding us liable for “unsuitable loans” we had better fact-find, document and be able to defend why the loan was done some years later. No fact finding and you expose yourself to a lawsuit from a borrower or the state.

    As far as I know (HERA) does not preclude insurance licensed individuals from originating, but from cross selling. It also requires “firewalls” to prevent such cross selling by licensed individuals. Please correct me if I’m wrong on this.

    Cross selling must stop, but after the funding many seniors may end up placing a portion of their proceeds into an investment or annuity with an outside agent. In some cases this may be appropriate and in others not.

    Great debate. Great comments. We all continue to learn.

  • Critic,

    I understand what you are saying and I do realize states have Reverse Mortgage laws in place. However, to reinforce what I was saying, each state varies in their laws. This is what concerns me the most, lack of uniformity.

    Yes, the way I covered the landscape is what I would like to see. I am sure many share my views. The senior citizen is what is most important. These folks are depending on us and our legislatures to do what is right for them. I see only confusion down the road for our seniors looking at Reverse Mortgages as their salvation. I see our seniors suffering the most, that saddens me and I am sure it does you as well.

    You are right, we need to support and expand NRMLA more than ever. Maybe we should both become Cynic’s?

    I have enjoyed our comments back and forth, you have expressed your points very well, I respect you for that. I do not know who you are but I would like to talk to you some day. Please feel free to E-Mail me. My address is: johnsmaldone@charter.net. You have a great evening and thank you for your reply.

    Best regards,

    John A. Smaldone

  • ScaredOfPoliticians,

    The formula for determining the credit line is a simple math problem. It can be expressed as follows:

    CL = APL – USFSA – BD – OSA

    Where

    CL = Credit Line

    APL = the adjusted Principal Limit

    USFSA = the unamortized Servicing Fee Set Aside

    BD = the HECM balance due

    OSA = the total balances of all Other Set Asides.

    The bullet point you reference in your comment from the Important Terms document is not scary in the least. It results from the formula above. If the balance due is equal to the principal limit, the amount in the credit line will always be zero; so how can you borrow anything for that month? This will normally be the status of a HECM when all of the available proceeds have been taken by the borrower; although the credit line usually grows by a small amount each month due to the difference in the expected interest rate and the note rate for the month.

    HUD does not need to clarify anything. Please look at the amortization schedules, especially those prepared on ReverseWare, Bank of America’s software. It is clear the principal limit is growing. If you simply subtract the credit line balance and the balance due each year from that year’s principal limit balance you will discover what the unamortized servicing fee set aside balance is at the end of that year. It shrinks year by year until age 100 when it is zero.

    For those of us who use financial calculators, the math is simple and using the B of A amortization schedule the difference between the principal limit and the total of the 1) credit line balance, 2) the balance due, and 3) the calculated unamortized servicing fee set aside is usually zero or one to two dollars. The small difference is due to rounding and rounding assumptions.

  • I just wanted to take a moment to thank John Yedinek for providing RMD! It is such a great resource for all of us, and I believe it will be a vital tool as we enter even rougher times. Even though most bloggers use an alias, we still connect in a very real way, sharing ideas and thoughts that affect the entire industry. Keep it going, John. We have power in numbers!

  • simple answer to the insurance question use same rule Stock brokers use. you don’t borrow money to invest period.

    How about a drive to void mortgage letter 2008-38
    after 20 years HUD has declared that the MIP does not help borrowers who want to leave thier property to heirs. Yes they are not responsable for any debt but if they want to buy home at the market prices not the mortgage balance which the MIP pays for they most pay the loan amount which leaves the insurance money wasted. and it must be an homes lenght transaction meaning a wife or husband who is younger and did not go on the program will have to vacate it if he can’t get a loan for more than the value of the property nor can he or she own the property.
    No wonder there is so much confussion when hud can changes rules as they see fit.

  • Dear Cynic,

    Thank you for your reply as well as your latest comment on “Scared of Politicians”. Wish we had access to a crystal Ball. I hope to hear from you VIA E-Mail soon. Take care and have a good day.

    Best regards,

    John A. Smaldone

  • Good inputs everyone.

    A few points of clarification:

    1. The question about how much the Line of Credit grows and weather it is linked to the original principal limit came from a discussion with a top official at HUD. I just didn’t pull this one out of the hat. It may sound “simple” to some, but we need to be students of the business, always asking and getting clarification. We must be careful not to quickly dismiss new ideas or questions but look behind the scenes. When I first heard of the LOC limit I spoke to HUD.

    The HUD official (who shall remain anonymous) said the HECM was never designed to sell the line of credit as an “ever-growing account” and mentioned the limitation. He also said those in the RM industry have incorrectly used the LOC as a “selling feature” but have incorrectly described it as a limitless growth. Maybe he is wrong, but it made sense to me why a lender would not increase a LOC each month, especially if home values are falling.

    2. On the question of insurance-licensed individuals we will have to agree to disagree. I’m very familiar with the provisions in HERA which currently do not outright prevent licensed individuals from originating. I would only assert that if you agree the government should prohibit such individuals from originating, you are jumping onto a slippery slope. Should we also prohibit anyone who sells any other product to seniors such as health care, estate planning (attorneys), etc.?

    Cross selling has slowed down considerably. In fact, licensed individuals could provide an audit report from each carrier they’re licensed with showing they have not transacted any insurance business with their clients. This would be better than eliminating many knowledgeable individuals from our industry which really needs professionals, not merely those who sell and take loan applications. We have a tendency to agree for more laws that address a problem that may be occurring 2% of the time. Be careful how much power you give lawmakers…they’re really good at unintended consequences.

  • “Be glad I do not know you personally. I personally would be following up on a daily basis.”….. You should avoid statements that infer threats or constantly calling someone.

    I’m a little puzzled by your statements. Are you questioning my intent to act in the best interests of the senior? If so, that seems a bit presumptuous and an unfair attack of character. I will act in the best interest of both the senior and the industry. I’m not sure why you would even question that.

    This forum is for originators…not the borrower. The point was to spur discussion of this very important topic and I agree we need to get to the bottom of this. Perhaps we can not question each other’s motives and character (not knowing each other) and maturely discuss the issues at hand.

    As the industry evolves we will need to make sure we are getting the true facts about the finer details of the HECM. Let’s not attack the messenger but try to uncover the truth. That’s my goal.

  • Dear Cynic and scared of politicians,

    I have read your comments back and forth to one another. If a HUD official made off the record claims to you Mr. scared of politicians by giving you information different from what we know to be HUD’s position, this is serious. I am one that would like to know if HUD is shifting its position on the fundamental nature of its insurance program and I am sure most of us would.

    I agree with Cynic, NRMLA should be brought into this. You need to present the facts as you know them. You will be doing a service to the industry and most important to our senior citizens. We would all stand behind you by bringing the confusion of what is or what isn’t to light.

    Thank you and have a good weekend,

    John A. Smaldone

  • John,

    Thank you. I am working on this issue of the principal limit and have been for several weeks. I would be happy to let you know what I find out.

    Cynic sounds angry or misinformed to say I am taking no action and am “willing to drop” the issue. Wow! I love mind readers.

    Anyways, enough of my rant…. Our discussions for the most part have been constructive and I take this issue very seriously. We must make sure what we are promising is what the senior gets….period.

    Keep up the good fight John. I’ll drop you a line when I know more. Have a great week as well.

  • Dear Scared of politicians,

    Thank you for your reply, I appreciate it. I am glad to hear you have been working on this issue. I will look forward to hearing from you when you learn more.

    As far as Cynic goes, I am sure he or she has had one of those Friday’s, I know I have. I think this whole issue of what Minnesota is attempting to put through and the mortgage industry as a whole, especially the Reverse Mortgage industry where we are concerned has everyone at their wits end.

    This country and the mortgage industry along with the securities market is in such a mess, no one knows from one day to the next what is going on. It gets pretty bad when people who voted in such a large stimulus bill never had the time to read it?

    Well, I guess enough of my ranting, you have a good weekend and you keep fighting on yourself. We have to give Cynic credit as well, he or she has put up a good fight for what he or she believes in and Cynic has made some very good points. These different points of views were very good, lets hope people have heard us.
    and understand us.

    Best regards,

    John A. Smaldone

  • Just to clarify for some who don’t read or disregard earlier statements: Im not internalizing or keeping this issue from anyone. Just a point to keep some from further embarassing themselves with angry and inaccurate statements.

    It’s time to drop petty insults and move forward as professionals. John, Ill be in touch soon with more information. Have a great weekend.

  • Dear Cynic,

    I thank you as well. Yes I feel our discussions have been extremely constructive. You are also right on target when you say this issue is serious. It is more serious than many may realize.

    I share with you our responsibility to the senior. We must be able to deliver what we promise. Our promises come from the knowledge we posses about the product we are offering. We count on HUD and our Governmental bodies that issue us the rules, regulations and guidelines. We count on these guidelines to be what they are, no more, no less. If in fact we do have the type discrepancies indicated, we are putting seniors in arms way.

    I am looking forward to hearing from you with your findings. I am also very interested in learning what Scared Of Politicians can come back to us with. You keep the fight on as well Cynic, you are doing great.

    My best,

    John A. Smaldone

  • Scared Of Politicians,

    I would like to think we are all professionals. We just want to get to the bottom of the issues. Up holding our fiduciary responsibility to the senior is number one, this is why we have so many comments on this topic of the Reverse Mortgage Daily Post.

    All of us that truly care want to be able to avoid violating the HERA cross selling rule any way we can. If you can help in any way, we would all appreciate you for it. Scared Of Politicians, you have a great weekend as well.

    Best regards,

    John A. Smaldone

  • I think the tone of Critic’s comments speak for themselves. (look in the mirror/ at how he describes the motives of those he disagrees with…)

    The point of true discussion is to debate the argument, not try to judge the other’s motives or character. That is the cornerstone of civil discourse and those who remain civil in their remarks and seek to persuade do well. Ad hominem attacks always backfire and make those doing so look defensive.

    In closing it’s sometimes best to agree to disagree. We can and should challenge facts and arguments, but none of us can truly judge a person’s motives over a blog.

    Happy originating all and keep one eye on the government.

  • Dear Critic and Scared Of Politicions,

    I have been involved in the Reverse Mortgage arena for almost eight years, I learn something new each day. I do not mean to sound ingnerent but I never knew of any limit on a LOC? I ask You both to please or any one to guide me to the motgagee letter or ruling that outlines the limit in detail, I would appreciate it very much.

    As far as the LOC being sold improperly, I agree, many do not realy understand an LOC properly. Apperantly I am one because I was not aware of any limit or cap on the LOC.

    What I am about to say is my opinion, right or wrong, any one reading this, be the judge. An LOC can work in behalf of a senior in many ways. You have the Medicade issue, debters going after the LOC amount ETC. The LOC is protected. However, I do not nor do I advocate the sale of an LOC as or have a simularity to a CD or savings account. The growth rate is only a method used to grow the amount of the LOC, based on actuary tables. It gives the borrower more money available to borrow as time goes on. The borrower sees the LOC grow each month when thay recieve thier statements from the servicer. This is the only way I know how to describe it.

    I am always open to sugestions on how it can be described better or if I am wrong, I welcome my colleagues to correct me.

    Any help you can give to better understand the LOC issue will be humbaly appreciated. Have a good day.

    Best regards,

    John A. Smaldone

  • Dear Critic & John,

    Thank you for your thoughtful remarks on this subject.

    Myself and another experienced originator have been working with the HUD official to clarify the line of credit and the principal limit. Critic you are absolutely right when you mention the conflict between the code sections and the HUD handbook, and that may be why one person at HUD is interpreting the LOC with a cap.

    Another concern is the same individual thinks the tenure payments only extend past the principal limit if the borrower takes tenure only with no modifications for the life of the loan (a ‘virgin’ tenure payment).

    One of the biggest problems I have is that many loan officers sell the reverse line of credit as some sort of “everlasting gobbstopper” of money that never stops as long as their is a balance remaining. My question is why would any bank or FHA allow this even with FHA insurance with the possibility of falling home values and increasing interest rates (which is our current predicament). It makes no sense fiscally or actuarially.

    If either of you know anything let me know as well.

  • Dear Critic,

    I understand exactly what you are saying. I am glad you referred to the various chapters. I am sure it helped many of those that are following these comments.

    The selling of the LOC has been abused by to many people in the industry. Many people are selling it as an investment tool, you and I both know this is misrepresenting what the LOC should be used for. It is sales tactics like this and those in the industry that are only interested in almighty dollar. Our senior citizens need to be able to have trust in us and not find out after the fact information was misrepresented to them. I am one that appreciates your input, keep up the good work. If you need my help in any way, do not hesitate to contact me.

    My best,

    John A. Smaldone
    johnsmaldone@charter.net

  • Dear Scared Of Politicians,

    You have good questions. I can only give you my opinion based on the knowledge I have at the present time. Please do not rely on my opinion. My opinion is based on what I know the HUD guidelines to be. If they are different than how I have interpreted them to be, my opinion is all wrong.

    How I view the guidelines are as follows. Both the LOC and a Tenure payment are based on actuary tables. It also based on present value calculations. However, you are right, in today’s environment, values are dropping. This affects the amount the senior is entitled to you. A home value two years ago was higher, we all know that. There again, the senior received what they were entitled to on the then based value.

    The point I am trying to make is that we can’t predict the future, this is why a Reverse Mortgage is unique, it is all based on actuary tables and future assumptions. Values today may be falling, values tomorrow may be rising. In short, what I am saying is that we can’t look at the value today and say a senior can’t have an endless rising line of credit or Tenure payments can’t go beyond the actuary tables. The plain old fact is that they can receive payments for the rest of their lives and yes, they can see their LOC continually rising if never touched. If I am wrong , I stand to be corrected with facts. I don’t know if my opinion helped but for what ever it is worth, you got it. Have a great day.

    My best,

    John A. Smaldone

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