Lewis Fights Back Against Regulators Comments About Reverse Mortgages

aba The media continues to dwell on the speech given by Comptroller of the Currency’s John Dugan at the ABA’s Regulatory Compliance Conference and Generation Mortgage’s Jeff Lewis continues to fight back.

I think it’s fair to say that Lewis has become the media’s go to guy for reverse mortgage commentary and over the past few days he started to take a stronger approach in dealing with Dugan’s comments. 

In Reverse mortgage compliance challenge looms for banks, the ABA Banking Journal details why Dugan’s speech leaves Lewis “fuming” because “there was no great urgency for him to opine on this topic,” says Lewis.

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When asked about Dugan’s concern over the sudden availability of cash available to seniors that take out reverse mortgages, Lewis said that, “there was almost a presumption that any product sold to a senior citizen is a ripoff.” He added that the speech implied that “our customers are incapable of fending for themselves. These people are intelligent, independent, and capable of being adults.”

It doesn’t end with the ABA article either.  Broker Universe published Lewis Angry With Dugan Speech on Reverses  where he defends the industry and said, “We are an incredibly self-aware industry and we are working through the challenges that we face." 

When asked about the concerns from using reverse mortgages to fund other investments, Lewis said, "We don’t sell life insurance, we don’t sell annuities, we don’t sell investments and we’re not responsible – we can’t be held responsible – if the people who do sell those things don’t treat their customers properly. We treat our customers properly in our industry."

It is amazing, he added, that if a senior citizen buys an inappropriate financial product, the blame is shifted to the reverse mortgage lender. The real issue is where is the oversight on those companies?

It continues in the Chicago Tribune’s Reverse mortgage debate in overdrive where Lewis argues that the whole purpose of the HECM program is to make loans to seniors who don’t fit into the traditional market.  "Pointing that out as a harbinger of doom is ludicrous. Without this product, if people couldn’t get to the money in their house, they’d just have to sell them.  It’s a complicated instrument but it’s not an instrument that takes advantage of anybody.”

Reverse mortgage compliance challenge looms for banks (ABA Banking Journal)

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  • Well stated. Name another mortgage product that is Federally Insured, watched over by FHA & HUD?

    Yes, improve it, but make sure you don't throw grandma
    & grandpa out with the dirty bath water.

    Being a senior myself, I recall Jonas Salk not curing every dsease, but the fear of Polio was erased.

    The Reverse Mortgage is no a cure all. But, I have seen it not only improve the quality of life for many seniors, while rescuing many from foreclosure, bankruptcy, & tax sales.

    Keep up the fight in ” Moving forward in Reverse “

  • I understand Mr. Lewis's frustration and that he does not like it when his industry is denigrated as a whole. He might want to be a little bit more sensitive about his own remarks regarding another financial services industry segment. His quote, from above, could inadvertently be misconstrued:

    “We don’t sell life insurance, we don’t sell annuities, we don’t sell investments and we’re not responsible – we can’t be held responsible – if the people who do sell those things don’t treat their customers properly. We treat our customers properly in our industry.”

    In general, I agree with Mr. Lewis, but some of those “people” could be selling APPROPRIATE products, just as the RM was appropriate.
    I think the common foes are the over zealous regulators and politicians and sound bite seeking journalists, not fellow financial product sellers.

  • I admire the way Mr. Lewis communicates. His style is direct, honest and effective. I read his excerpts over and over and say to myself “I wish I could communicate like that”.

  • Jeff Lewis is right many government bureaucrats just don't understand reverse mortgages. It is not that annuities, life insurance are bad products but when loan originators make a reverse and ethically refrain from selling other products the reverse gets blamed by people who don't understand seniors. I am a senior and I have a reverse mortgage it is a wonderful product. Seniors are not stupid as some do gooders believe. Most seniors I deal with are highly educated and don't deserve to be dissed by all knowing government regulator types. The reverse started with Reagan and was made permanent by Clinton in his second term. Congress has worked on it twice. It is a mortgage period
    it doesn't have to be rethinked over and over again.

  • So…. a senior qualifies for a forward mortgage and a reverse mortgage. the senior opts for the reverse. In Mr. Dugan's mind set, the senior is now a victim and somehow being “ripped off”.

    What a double standard and absolutely misguided attitude toward reverse mortgage products.

    I inform my clients, their family members, friends, and trusted advisors of all the options available. The choice is always theirs. As a 20 year veteran of the forward mortgage industry it's very hard to sit back and not “sell”, but no one will ever be able to come back and accuse me of taking advantage of a senior.

    Thank you Mr. Lewis for representing our RM industry is such a professional manner.

  • It always seems like I am throwing cold water on great comments about a well spoken response. The response was great! But then read the article and realize what a dinky portion of the article this response is. The statement by Mr. Lewis is fully diluted by the remainder of the article. The article makes a great effort at rehabilitating the remarks of Mr. Dugan.

    For example, read the author’s description of reverse mortgages in the same paragraph where Mr. Lewis is quoted. “They enable the elderly to convert a paid-off home into fresh money…. At the end of the arrangement, the home belongs to the lender. No payments need be made during the life of the borrowers.” Why was this description made in the same paragraph as the statement made by Mr. Lewis? Was it to link the two together?

    Two of the biggest RM lenders in this country are influential members of the American Bankers Association (“ABA”). If the ABA cannot get it right, who will? We had better stop patting ourselves on the back on how far we have come in educating and reevaluate where we are actually are. What we have successfully done is market using an educational model. This kind of marketing is accelerating the attraction of more and more regulators to our product than ever before. Many of these regulators are correctly attacking much of the marketing that our industry is generating in the name of “education” and showing how much misinformation our marketing really reflects.

    The author got it wrong. Mr. Dugan got it wrong. Most attorneys acknowledge that they have heard about RMs but have no real idea what they are. Overall CPAs are the same. It seems CFPs and so called “financial planners” have a better idea but that may be as much because they see this financial vehicle as a means to increase their own sales as it is because they see it in an altruistic manner. Let’s not kid ourselves, we need to redouble our efforts to reach out and really educate financial leaders.

    The article quotes Mr. Dugan as saying: “I believe that any final guidance should direct banks to apply to proprietary reverse mortgages the same types of consumer protection standards applicable to HECMs, including the requirement for independent counseling.” It seems this time Mr. Dugan has never heard of California or examined the independent counseling requirements for proprietary reverse mortgages in this state that have been in place since 2006. What other consumer protections does he want and what will they cost borrowers? I believe this article was far more a piece of propaganda rehabilitating Mr. Dugan (one of the significant regulators of ABA members) than one allowing Mr. Lewis to fairly air his views.

    It was interesting that the author stated: “We attempted to contact the National Reverse Mortgage Lenders Association for this article, but no spokesman was available by publication time.” That same (the last) paragraph at least directed readers to the NRMLA website. I wish the author had waited for the NRMLA response before “going to press.”

  • Cynic

    Unless I am misunderstanding your quote, below, is seems a little bit over the top.

    “It seems CFPs and so called “financial planners” have a better idea but that may be as much because they see this financial vehicle as a means to increase their own sales as it is because they see it in an altruistic manner.”

    Perhaps “so called financial planners” view RMs as part of the “financial planning” puzzle. In theory, FPs are sometimes supposed to quarterback the efforts of legal, accounting and product usage to help a client; it is part of their training, after all. Yes, they also sell products and so do RM people. Also, many attorneys and CPAs are not all that altruistic (they get fees). Unfortunately, Mother Teresa was never in the financial services industry to set an example for us all.

    • dduck12,

      I did not choose the name, “The Cynic” for nothing. As far as I know there is not one reverse mortgage originator who has never held an insurance or securities license who has ever once been accused of selling a senior a legitimate but inappropriate annuity or financial product.

      You are right. Most attorneys and CPAs are compensated but generally not from the sale of recommended products unless they hold the required licenses and sold the products. Even though some in these two disciplines hold such licenses, I have not heard of one of them being involved in the sale of inappropriate products from reverse mortgage proceeds. I have known and heard of “financial planners” (but not CFPs) involved in such sales. I am just trying to “stick to the facts.”

      My greatest gripe with Mary Schapiro, current SEC Commissioner, was when she headed up FINRA. Last year she attacked the reverse mortgage industry for supplying the proceeds that were used to acquire the inappropriate products rather than chastising her own members who were selling them.

      Is every insurance salesperson, securities licensee, or “financial planner”, a “bad guy”? Absolutely not!!! But generally the facts are that legitimate but inappropriate sales of annuities and other financial products can only come from these sources. If you know of other facts, please provide them.

      Why does Mother Theresa’s name come up in rebuttals? It is about time we allow that dear woman to rest in peace.

  • Cynic

    I'm confused (not my new handle, however). Either the sale of a financial product, say a LTC insurance policy, is appropriate in some one's eyes, or it's not. It's the eyes that count, not the product.
    Speaking of products, I'm sorry, I like some cynics, consider the by-product of legal and accounting work to be a “product” of sorts. Of course, unless you are a disciple of MT (rest in peace) where I would concede a strictly altruistic only motive.

  • dduck12,

    I apologize if my comments are too curt but I am tired of reading and hearing how the reverse mortgage originator was somehow at fault for things that are clearly the fault of another advisor.

    I am convinced a 10-year deferred annuity sold to a woman in her mid eighties with an inadequate explanation of the surrender penalty when it was clear and obvious that some of the proceeds that were used in the purchase would be needed for financial needs in the next few years — was clearly inappropriate. Such a case was presented in the McCaskill hearing.

    I have met an insurance licensee and a series 6 holder who called himself a “certified retirement planner” who sold well over 30 annuities in one year to HECM borrowers but could not explain why an annuity was more advantageous than HECM tenure payments. His RM leads were the RM sales his wife made. He got a little over 70% of all her sales to get his annuities. Here the trouble was that the annuity sales might not have been inappropriate but not even the annuity salesman determined if they were appropriate. He did know his commissions were great.

    An originator I work with (I’ll call Don) holds a PFP and a Series 6 license and is an annuity qualified insurance salesman. Don presented the HECM program to a woman who was with her boyfriend. As part of Don’s presentation he warns seniors to be careful how they use their proceeds and explains he could sell annuities and other financial products to them but he does not because of his concern about the appearance of a conflict of interest. Near the end of his warning the boyfriend sniffled and walked out. The girlfriend turned to Don and said not to worry but her boyfriend got a RM a few years before and had been led to believe that an annuity was the best thing for him. When he needed more money than was in his remaining line of credit he had to sell the annuity and suffered over a 10% loss. He had told his girlfriend that he fully explained his cash needs to the annuity salesman but the salesman somehow explained he could get the cash he needed any time he wanted at little or no cost. Then he found out the hard way he had been lied to. When asked what the boyfriend did about it, she said nothing because he did not want his last years tied up in litigation or prosecution and he was embarrassed and did not want to be known for making such a silly decision because he used to work in a bank and all of his friends trusted his judgment in financial matters.

    You are right; an “inappropriate” sale is in the eyes of the observer but that does not mean the sale was not inappropriate.

  • Cynic
    So we can agree, there are crooks holding insurance licenses. (Those were good examples of the abuse by some.) I probably knew that way before you did, having been screwed out of sales and having lost clients to them over many years.
    What we may not agree on is that any one group, including RM and insurance salespeople, are all crooks. I don't like when people I talk to say it about you, and I don't like it when said about any group (yes, even politicians). It is a lazy man's out and doesn't help solve the problem.
    I would encourage anyone that has been the “victim” of an inappropriate sale to file a complaint with the appropriate regulator and consumer protection agencies.
    BTW: Many times these crooks are merely reacting to pressure from above to perform, by management, and these are the people that I really think mess us all up (think Mozillo in the RE business); it is always easier to catch low level crooks.

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