Fannie Mae and T&I Defaults, Significant Issues Facing Reverse Mortgage Industry

image MortgageOrb editor Phill Hall sits down with  John LaRose, CEO of reverse mortgage subservicer Celink to talk about how the industry is handling the recession and the challenges it faces in the coming years.

Specifically, LaRose tells MortgageOrb that the two most significant issues facing the industry are the reliance on Fannie Mae and the growing issue of tax and insurance defaults. “With these two remaining issues unresolved, we are facing an uncertain future and that’s what keeps me up at night,” said LaRose.  

Below is a quick snapshot of the beginning of the interview:


Q: Reverse mortgages have recently been the subject of comments about risk – first from Comptroller of the Currency John Dugan and then from a Government Accountability Office report in June that called for the "need for improved controls over counseling for borrowers." Why do you feel these types of comments are now popping up?

LaRose: I think it’s natural when a highly unique and complex loan product like a reverse mortgage, designed for the singular demographic of our senior citizens, starts growing so substantially that regulators will literally "trip over themselves" to try and protect the borrowers. We welcome regulation and oversight, but some of what is happening at the state level is getting quite ridiculous, because a lot of it is merely redundant with what is already in place at the federal level.

The National Reverse Mortgage Lenders Association has always taken a very strong approach to promoting ethics within the industry, which, in fact, compelled our company to publish our own code of ethics.

That said, I believe the sudden surge in reverse mortgages in the past few years has definitely placed a strain on counseling resources, and I think if the Department of Housing and Urban Development (HUD) addressed this mostly unfunded mandate, it would help alleviate the problem. I also believe the federal government would do well by providing HUD with the funds, internal resources and staff to improve its oversight and management of counselors.

Person of the week:  John LaRose and the challenges facing reverse mortgages

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  • Mr. John LaRose did a great job at presenting many issues. However, I was taken back by his strong statement about taxes and insurance. I hope he elaborates on that worry.

    It was also surprising to read his statement about reverse mortgages being a nice cash flow stream because of where it was placed it could have been referring to the lender, investor, or borrower. If it is either of the first two, it would be interesting to hear his thoughts on that.

    Mr. LaRose made it abundantly clear he does not agree with comments being made by government officials but did it in a most tactful manner. His statement about bristling over some zealous remarks of senior advocates was refreshing.

    Congratulations!! Great job, great interview.

  • Jim:

    Thank you for the kind comments. My concern over T&I defaults is that there are thousands of them in some sort of “moratorium” in that no one is commencing foreclosures on these defaulted borrowers…nor do they/we want to! There will come a time, however, when HUD and/or Fannie Mae will instruct the servicers to begin foreclosing and that is when we face the prospect of an industry nightmare scenario.

    Picture this, a TV film crew and reporter are interviewing Evelyn McIntire (made up name) an 84 yr old widow sitting on the curb with all of her earthly possessions because she was just evicted from her home of the past 51 years. And no, she has no family, most of her friends are either dead or in the same financial shape she is. Now picture a microphone and camera stuck in your face and the reporter asks you why you gave this woman a reverse mortgage because as a result, she is now homeless. Yep, that definitely keeps me up at night.

    The “nice cash flow stream” I mentioned was the servicing income the lender/investor receives over the life of the loan. For example, if a lender/bank had 5,000 loans and used Celink as a subservicer, they would earn $75,000-$100,000/month without having any overhead. I would say that is a very nice cash flow stream for either the lender or investor.

  • John Larose,

    Great job, you did us all proud the way you presented the issues. You are to be commended sir, we need more of this kind of representation of our industry.

    John A. Smaldone

  • John Larose,rnrnGreat job, you did us all proud the way you presented the issues. You are to be commended sir, we need more of this kind of representation of our industry.rnrnJohn A. Smaldone

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