No HVCC for Reverse Mortgage Industry Says FHA Commissioner

The Federal Housing Administration has no plans to implement the Home Valuation Code of Conduct (HVCC), said Commissioner David Stevens to a delegation from the National Association of Mortgage Brokers (NAMB).

Stevens said that he was well aware of the problems originators have been having with the code, and that FHA is not considering adopting the appraisal system now in place at Fannie Mae and Freddie Mac.  However, HUD is looking at alternatives that will insulate appraisers against inappropriate pressure said a statement from NAMB. 

NAMB’s statement also said that FHA is concerned about potential loses in the reverse mortgage (HECM) area.  HUD says that due to declines in home values, variable rates, and the fact that people are living longer, they may be forced to change the program. 

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HUD also intends to issue new directives on appropriate advertising for HECMs (about time).  They are concerned that some advertising promotes seniors using the cash from their residence and spending it on vacations and expensive personal items.  A Mortgagee Letter on HECMs is expected within 60 days. 

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  • It would be most reassuring if HUD would issue a re-statement that
    the FHA (MIP) for (HECM) is kept in separate trust

    1. MIP for (HECM) funds are not transferred to the General Fund of the
    United States Treasury.

    2.Funds are used exclusively to cover expense and cost of property
    transfer for holding of stressed Reverse Mortgages transferred to them
    from under secured lenders.
    3.Current analysis of funds on hand and projected pay out of losses for
    next 5 years.
    With proper diagnosis ,we will all be better prepared to take the
    prescribed medicine. FIRST WE MUST BE CONVINCED WE ARE SICK'
    Bob LaFay Reverse Mortgage Counselor

  • Two questions;

    1. Are HECMs sold to FNMA still subject to HVCC?

    2. What's wrong with people using the unearned gift called home equity to take a vacation or buy expensive personal items before that gift disappears? I assume it's OK to sell an investment to do so, right? Who defines what an expensive personal gift is anyway?

    • “Times they are a changin'.” We need to change with them. Too many consumer groups are criticing us for being “enticing.” So what if our mailers and other marketing information leaves that off. How many of the people you are helping are primarily motivated by taking a vacation? Probably not too many. Is this really that big of a deal?

    • Exactly! HECM funds can be used for any purpose whatsoever . . . why NOT advertise that seniors can use the funds for whatever? Vacation? Car? Second Home? If it is legal to do, why CAN'T originators advertise the fact! Sounds like someone is jealous that some seniors are not struggling and can actually enjoy their golden years!

  • I think the commissioner's point is that people should spend their retirement assets carefully. It seems that most of the bad press has highlighted people that have used reverse mortgage proceeds foolishly, and the reverse mortgage itself has not been the problem (although it has been portrayed as the problem). So I think his concern is valid. It may be OK for some people to use some reverse mortgage proceeds for things like vacations if their finances are otherwise adequate, but it shouldn't be the primary basis of an advertising campaign.

    • Who are you to dictate what the 'appropriate and acceptable' uses for reverse mortgage funds are? Big Brother government and our current socialist president would love nothing more than to dictate what our discretionary use of our OWN money should be!

      • Hi Cynthia. I don't understand your comment, and I don't think you read my post clearly. I stated nothing about “appropriate and acceptable” uses (by the way I agree with you and don't think anyone should dicate what someone does with their money). I simply stated that in my opinion vacations or expensive personal items shouldn't be the primary basis of an ad campaign.

      • Again, who are YOU to dictate or decide what the 'primary basis of an ad campaign' should be? Its called the First Amendment, something you big brother liberals cannot get your minds around when it is being used to promite free market/conservative ideas and concepts. But when you can use it to defend some left-wing idea or statement that YOU are trying to promote, well then it is another matter and protection of free speech becomes your GOD! Prescription meds or vacations . . . both legal uses for the money . . . both can be the 'primary basis' of an ad campaign legally and morally!

      • I'm not dictating or deciding anything, I'm not in a position to, just expressing an opinion. Our industry is under attack and we need to be careful how we promote the use of RM proceeds.

  • Good morning,

    I feel in one sense the move on the part of FHA is very good move. However, I can't understand why their should be restrictions on how we can advertise to seniors using their home to get a reverse mortgage for enjoyment, luxuries or what ever they want to do with the money.

    If a senior wants to leverage their equity for what ever it may be, why should their be any restrictions on what we should be able to tell them, verbally or by advertising as long as we are disclosing all the costs and particulars of a Reverse Mortgage. This will go against all we have been telling borrowers for years. We have something like 68% of senior home owners over 62 years of age in this country that own a home free and clear. I know our company is looking at starting marketing programs geared to those home owners with very little or no debt on their homes.

    Our industry should not be looked at as a welfare agency. This is what the news media, legislators, the agencies and states and you name it have tagged our industry to be. How have we allowed this to happen.

    This would be a disaster to put restrictions on advertising to those home owners that want to use their home to improve their quality of life. Am I looking at this wrong, please, set me straight if I am. I wonder if the next step is to disallow us from doing a reverse mortgage on some one that wants to buy a Boat and use a reverse mortgage to do it. They may want to buy the Boat for improving their quality of life but not want to have payments to make on the Boat, the reverse mortgage will do just that for the senior.

    I feel the restriction on advertising such things as vacations and other luxury items is the first step by our agencies and legislators as well as on the state level in eliminating a major purpose for a reverse mortgage. It will also just about eliminate our future in the industry. I may sound radical but lets face it my friends, how many times have we seen bills passed that lead to other bills passed that affect our whole way of life. We need to be very cautious on this, mark my word. I call on Peter Bell of NRMLA to look at the repercussions this could create in the future. I also ask Peter to consider lobbying against this move by FHA. If any one feels I am wrong in how I am viewing this, especially you Peter, please, set me straight. However, if I am right in my analysis, support my view and ask Peter Bell of NRMLA to get behind it.

    Thanks you,

    John Smaldone

    • Very thoughtful and well-written. Reverse Mortgages serve those in need as well as those who want to enhance and improve an already enjoyable lifestyle. For every senior needing money just to make ends meet, pay for medical bills, or make home improvements, there are seniors just wanting to enjoy the fruits of what they worked all of their lives to attain! Reverse Mortgages should not be seen as just being for those struggling or in dire need of additional funds.

      • Cynthia,

        Thank you very much, I appreciate your response. You are right in what you have said. I ask myself, why are they doing this to our industry.

        I wonder if our politicians realize by doing what they are doing to the Reverse Mortgage industry it will be cutting off a main source of funds or income to our seniors. We know that no one can live on social security alone. Is this being done because of some master plan that is in the works that the American people don't know about?

        You have to wonder anymore, nothing much these days make sense? Well, I did not mean to ramble on Cynthia, it just does not seem right what has been taken place in our country. You have a good evening and thank you again.

        My best,

        John A. Smaldone

  • Is Anyone Concerned or is it a Good Thing…… that FHA Commissioner Dave Stevens was, for 11 years, the biggest cheerleader for World Mortgage (Golden West Financial)Option Arms? He was the head of sales, East of the Mississippi for them, and I attended several Option Arm broker pitches at hotels, and went on a couple of ski junkets hosted by them and funded by MI and attorneys….

  • FYI to Floridareversemortgageguy:

    The two investors for the Fixed HECM products are GNMA and FNMA. GNMA rates are significantly higher, starting in the 6% and up range. If you've sold a %.56% or 5.685% Fixed Rate HECM, it was purchased by FNMA.

  • Part of me believes these restrictions would be good but in the end I don’t think it would be. Every senior has a different need. Not everyone is doing the reverse mortgage for the same reason. I don’t believe they should restrict advertising the “nice” things in life. Some seniors are going to do a reverse mortgage for this reason. Although, in my opinion if a company is strictly advertising this way they are not going to be targeting the majority of seniors doing a reverse mortgage. More and more government restrictions are not good…restrictions within reason is fine. LESS GOVERNMENT IS BETTER. Unfortunately it feels and I believe we are on the path to greater restrictions. Its the seniors $$ let them do what they want without the government saying they can do this and they can’t do that…that is just absolutely crazy!

  • HVCC compliance may or may not be required from the Federal agencies and/or enterprises involved with HECM loans, but many originating banks and brokers have decided to implement the HVCC procedures anyway to avoid potential future liabilities. HVCC appraisals take more time since you're ordering them from an Appraisal Management Company instead of the appraiser directly, and cost more due to the AMC's review fee.

    Depending upon your point of view, you can see these originating company decision as a proactive measure to adopt what looks inevitable and which is required for much of the other mortgage business anyway, or as volunteering for a competitive disadvantage in cost and time.

  • “Who are you to dictate what the ‘appropriate and acceptable’ uses for reverse mortgage funds are? Big Brother government and our current socialist president would love nothing more than to dictate what our discretionary use of our OWN money should be”

    This is a view that is way out of touch with reality.

    It is the difference betweenm flogging a mortgage product and providing responsible and professional advice.

    Obviously, it is made even more compelling by the vulnerability of the target group of customers.

    Regulators in UK and Australia have now imposed ‘best advice’ and ‘most suitable procut’ rules respectively on both mortgage brokers and financial advisers/financial planners with both civil and criminal sanctions. It is for sound reasons and USA is lagging well behind here.

    It is fundamentally fiscally irresponsible to squander home equity on discretionary spending for both both private reasons and public policy:
    1. For any financial product to be fiscally responsible requires it requires by definiation the benefit to exceed its cost – a simple cost/benefit analysis. As professionals, I am sure everyone here is fully capable of calulating (a) a Discounted Cash Flow of the $$$ received by the borrower during the loan term and (b) a Net Present Value of the future loan payout or total cost of the loan. Is (a) > (b) ? No ! Reverse mortgages always – repeat ALWAYS – fails the cost/benefit test.
    2. It does the USA economy no good to see an entire generations’ housing not pass to the next, but be lost to the banks. It compounds the inter-generational unfairness that results from the ageing population and is made worse in an economic environment where the kids are struggling to get into the housing market or build wealth for their own future.

    So recommending the use of a reverse mortgage needs to have compelling non-financial reasons. These might be that the borrower is using a spare investment property, has no kids or beneficiaries, is otherwise unconcerned about equity depletion, has other assets or capital, is financially assisiting kids or grandchildren etc etc.

    In better regulated countries, I would have grounds to sue your butt off if you floggd my parents a reverse mortgage resulting in the loss of our family home/inheritance if there was (a) a more suitable product available or (b) if it didnt best meet my parents needs.

    Now in fairness, right now there are no alternative products – but, thankfully, they are coming (see http://www.iwslimited.com)

  • Ms. Campbell and Mr. Thompson certainly have wide difference of opinion. I fall in the middle somewhere, thinking that the use of funds from a RM are up to the borrower and his heirs to use the way they see fit. Putting on my financial planner hat, conversely, says use the proceeds for economic security first and fun last.
    I don't think calling people socialists and liberals, when they are trying to help many seniors out of financial binds helps much. Advertising should be free speech, but common sense says don't put all your eggs in one basket by pushing any spending that could attract the ire of regulators. (If I called them storm troopers, I would be wrong.)
    And before I get blasted as a liberal nut, be aware that I am basically a conservative.

  • I’m not dictating or deciding anything, I’m not in a position to, just expressing an opinion. Our industry is under attack and we need to be careful how we promote the use of RM proceeds.rn

  • Ms. Campbell and Mr. Thompson certainly have wide difference of opinion. I fall in the middle somewhere, thinking that the use of funds from a RM are up to the borrower and his heirs to use the way they see fit. Putting on my financial planner hat, conversely, says use the proceeds for economic security first and fun last.rnI don’t think calling people socialists and liberals, when they are trying to help many seniors out of financial binds helps much. Advertising should be free speech, but common sense says don’t put all your eggs in one basket by pushing any spending that could attract the ire of regulators. (If I called them storm troopers, I would be wrong.)rnAnd before I get blasted as a liberal nut, be aware that I am basically a conservative.rn

  • Disturbing article on RMs today, Aug. 27, 2009, in the WSJ:rnhttp://online.wsj.com/article/SB10001424052970204044204574362641338197748.htmlrnrnSorry, guys.

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