With echoes of earlier calls for “net tangible benefits” from the forward world resonating, suggestions now are being floated for “financial assessments” of seniors in the mood for a reverse mortgage. Washington, D.C. attorney Jim Milano says “one policy floating around is whether seniors need some kind of financial assessment and, if so, who should perform that assessment and what should the bulk of that assessment be.” The Housing and Economic Recovery Act of 2008 “requires HUD to establish by July [this year] protocols on this,” according to Milano.
Yet, such a prospect is raising some goose bumps. “Financial assessment is a very slippery slope,” cautions Regina Lowrie, president and chief executive officer, Vision Mortgage Capital, LLC, Blue Bell, Pa., who was tapped to head an executive task force on reverse mortgage lending created by the Mortgage Bankers Association last year.
She says consumers are “the best ones to determine which products are right for them.” At the same, though, Lowrie advocates for the required counseling currently embedded in FHA regulations. “Our concern is that as the secondary market improves and liquidity comes back there will be new products introduced by the private investment community and when that happens we [need] the same protections [that are] built into FHA/HECM,” says Lowrie.
But, when does counseling become financial assessment and then outright instruction on what to do? “I think taking the decision away from the senior would be a mistake and demeaning,” asserts Sherry Apanay, senior vice president, Generation Mortgage Co., Atlanta. “We already have mandated counseling and encourage seniors to consult with ‘trusted advisors’,” she notes.
Recently HUD issued a mortgagee letter (ML 2009-10) to reiterate its policies on counseling for seniors who apply for a HECM, adding several new requirements. That letter strictly forbids lenders from assisting would-be borrowers in scheduling counseling and borrowers must take the initiative when it comes to contacting a counseling agency.
While the new mortgagee letter “requires counselors to peak under the ‘financial hood’,” according to one insurance company executive, it is not sufficient. “We need [improved] underwriting guidelines,” the executive declares, adding: “We need curative and preventive solutions [because] the industry is changing at warp speed.”
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 firstname.lastname@example.org