Reverse Mortgage Amendment Proposed to Consumer Financial Protection Agency Bill

Congresswoman Dina Titus (D-Nevada) and Congresswoman Jan Schakowsky (D-Illinois) co-sponsored an amendment to H.R. 4173, the Financial Services Bill being debated in the House of Representatives today.

Amendment #209 would require the new Consumer Financial Protection Agency (CFPA) to, as Rep. Titus described it, “oversee the reverse mortgage industry to ensure seniors are not exposed to unfair and deceptive practices.”

The amendment itself contains some important features which include:

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  • Requiring the Director of the CFPA to issue regulations regarding reverse mortgage transactions within 1 year of the date of enactment
  • Clarifying the Director’s authority to consider additional protections regarding reverse mortgages under both consumer regulation statutes and HUD regulations
  • Calling for the agency to provide an integrated disclosure standard and model disclosures for reverse mortgage transactions that combine the relevant disclosures under the Truth in Lending Act and the Real Estate Settlement and Procedures Act (RESPA) with the required HECM disclosures

In describing the need for the amendment, Congresswoman Titus said in her remarks to the House today, “Protecting our seniors from unfair and unclear financial products is long overdue.  Reverse mortgages need to be clearly and closely monitored and regulated in an effort to ensure seniors do not lose their home and equity they have built up through a lifetime of hard work.”

Congresswoman Titus further defended the need for the amendment by saying that “many seniors find themselves in financial hardship due to unfair and unclear agreements along with excessive fees that come as a result of reverse mortgages.” Her Deputy Chief of Staff and Communications Director Andrew Stoddard added in an email to RMD:

Our district in Southern Nevada is ground zero for the foreclosure crisis.  Predatory lending and an under-regulated mortgage market played a large role in the collapse of the housing market.  As the number of reverse mortgages has continued to rise rapidly, Congresswoman Titus wants to make sure we are ahead of the curve so that deceptive practices can’t be used to prey on seniors and lead to the next wave of housing problems.

Congresswoman Titus added that the amendment has the support of the AARP.  A vote on the amendment is likely to come later today. As of 2PM EST, Congresswoman Schakowsky had yet to issue a press release on the issue. Her office did not return RMD’s request for comment.

Update, bill has been passed.

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  • Some have promoted the idea that the only problem with bad press on reverse mortgages is that it comes in waves; it has no real lasting impact. So it was concluded that the impact of the last wave should quickly pass with no real impact. I for one fully disagree with that conclusion.

    For decades the Boston Red Sox only lost during certain parts of the year; yet the tag – the curse of Bambino – stuck for over three quarters of a century. The Chicago Cubs have earned a similar reputation without a similiar tag and now the Detroit Lions appear that they are on their way. It is nonsense that bad press that only comes in waves does not have some kind of significant and permanent negative impact.

    Here is a dinky industry with far less than 10,000 originators who average one or more loans each and every month and less than half that amount in administrative, operations, and support staff but we are receiving our own amendment with directives in what is supposedly a consumer financial protection agency bill. Yet where are the same types of directives to insurance companies and securities firms about safeguarding seniors when they have reverse mortgages and use proceeds to buy insurance and financial products.

    It is strange that the same bad press that works so negatively against us does not do the same for annuity sales people and securities licensees. We are a small little industry with little influence and a whole lot of proportionately unwarranted bad press. We are an easy target for Congress and it shows.

    • well put. It boggles the mind – focus can be easily diverted or directed when there is a voice. In this case, it appears to continue to be an uneducated ear taking in the data and making it their own. A shame, as we know it only hurts the seniors we attempt to help.

  • Here we go again. Another two Democrats wanting to get “ahead of the curve so that deceptive practices can’t be used to prey on seniors and lead to the next wave of housing problems.” A Democratic Senator holds hearings in DC and drags people to her home state to put down the industry. Last year a Democratic state chairwoman calling a Republican a “bogus reverse mortgage peddler.” A Democratic Administration that HUD blames for the budget problem and ultimately the 10% reduction in Principal Limits.

    When the Republicans were in power, there was nothing like this. In fact it was two Republican administrations that created and fostered the HECM program. Now grant you a very few Republicans do not even believe in the FHA insurance program but nothing like these extreme measures developed under their leadership.

    While HERA was under a Republican Administration, it was the Democratic Congress that it on the President and a Democratic controlled committee that caused the reduction in origination fees.

    While one party may be slightly worse than another as to HECMs, it has been rumored that NRMLA actually endorsed the Democratic Party at its Convention. When the cards are stacked, it seems the Democrats are at least as hostile to the program as any Republicans. In this kind of environment such party endorsements just do not make sense.

  • What is equity? Do people really work hard to build it up or did the market create it? If a home's value stayed the same as the day you bought it and you worked hard to pay off your mortgage would you have any equity?

    Equity is a gift that can disappear as quickly as it can appear. It doesn't belong to anyone. Catch it while you can or else. Market movements erode equity to a much greater degree than RMs.

  • We already have them. FINRA, our broker dealers and state regulators have us jumping through hoops of forms to sell a senior (65) a variable annuity, with non-RM monies. Yes, they treat seniors like idiots. And, I'm sure this new beast will add another layer of paper and rules.
    Plus, my broker-dealer prohibits using “borrowed' money to purchase an annuity.
    Hey, there's plenty of regulations for everyone, like money, just print some more and get reelected (that's what it's all about).

    • dduck12,

      Who trumps — FINRA, broker dealers, state regulators OR the U.S. Congress? FINRA used to be the NASDAQ but that name became to bad they went to FINRA now with Madoff and Stanford it will probably another five years and it will be transformed into CLUELESS.

      One type of annuity has to be signed off on? Or a few broker dealers have some specific restrictions? It is not like you cannot switch broker dealers.

      How does any of that compare to one piece of legislation by the U.S. Congress? If the Senate passes this bill, then the super agency has been told to directly regulate our industry. I do not think that is the same as FINRA, a non-governmental mandatory trade group or a single broker dealer or even some state regulator.

      • Who trumps?

        At this point Donald Trump.
        The rest is a mess.
        Did you and the Cynic get espresso machines for the holidays (PC?)?
        You are only supposed to drink a little. Ten or more cups a day could be too much.
        Have a good one.

      • dduck12,

        It is so bad, my wife limits me to one cup of coffee each and every day but then I read a little and wah-lah.

        You guys on that island really have an inflated view of Donny. As I understand it his casino is still sending buses to your island to pick up seniors for their gambling fix at his NJ casino. I wonder when Congress will catch on to the fact that some of those seniors could be using money they took out of their HECMs. Will seniors have to sign documents and file financial information that proves they are not using HECM moneys before they can get on to one of those buses? Watch out Donald T., Congress may be coming after you next.

  • Equiy: The value of a property over what is owed on it.
    If you have paid off the mortgage, whatever it is worth is your equity. Yes, if values go up, your ownership is considered more valuable. And in our more sohisticated financial world, you might use that ephemeral “value” to do something else. If values go down, some snob is saying your house may not be worth the value of your car. But more fundamentally, the roof over your head is PAID FOR. And while there are always complications, that, in itself, is of value.

    • ylegrand,

      Please!!! To have equity you must own something. So what is it that a homeowner owns? Is it the land? Well not exactly since lack of paying property taxes can result in the loss of ownership.

      But at least one can control when the land is disposed of. Well not exactly all of the time since the governments have the power of eminent domain.

      Oh but I can improve it and no one can do anything about that and then there is the roof over my head that is fully paid for. Oh yeah there are building codes and then the state can raise the rent (property taxes) when the improvements are complete. Oh yeah and that eminent domain thing includes the improvements.

      Oh but I control the land as long as I own it. Oh yeah there is those easements and ownership in minerals, air space, and other issues. Oh yeah and then there is that pesky street that is on the land I own and the area around the curb. Oh yeah I cannot control who parks on that street that is on my land or get tickets waved if cars park in the way I say but not the state vehicle code.

      But I paid off my mortgage!!!!!

      Ah for the idealism of the 17th century. Oh, but that was about 400 years ago now.

      By the miracle of time, let’s move forward those 400 years. Home ownership fundamentally is nothing more than the ownership of or control over a portion of a bundle of rights. I have a portion of those rights but so does the state, county, and city governments. In my case, Chevron owns some as well as the city utility companies. I know there are more but even someone who is a licensed real estate broker doesn’t know all of the parties who have some of those rights or even what those rights might be.

      • The Cynic,

        Now I see what dduck12 meant about expresso. Wow!!!

        You know I never heard the concept of capturing equity using a mortgage until a few years ago. When I came in to this industry anyone who seriously discussed a reverse mortgage getting greater than the value of the home was laughed at unless the nonrecourse nature of reverse mortgages was being discussed. In California, times had been so good since mid 1999, equity seemed to grow faster than any reverse mortgage we did in this state.

        One writer on this website is fond of telling the story of one borrower who took out a HECM some years back and has a credit line today of almost twice the current value of his home. The line of credit is insured by FHA. Now that is one powerful financial product and has really captured equity for that borrower — and apparently he is still living in that home with no interest or principal payments.

        So by capturing equity, the fleeting nature of home equity can be muted. Apparenty $60,000 of the equity (the house was appraised for $300K when the HECM originated) could not be captured; however, that line of credit is growing each month. As I recall the house was fully paid for at the time of the HECM. Not bad.

      • I'm not big on the accuracy of words and I am marketing oriented.
        Give me a Kleenex to wipe the Jello off my chin.
        So when I heard Great Britain, and I think Australia, call these loans Equity Release, I loved it. Viagra for your home, or whatever. The buses to Donald's casinos could use some spicy ads to inspire the seniors to play with their non-RM money (take that, FINRA/CPRA). However, the way big Gov. is expanding, I think not.

      • That is so many in this industry hate compliance officers. Marketing people usually want to sell, not worry about a word “slippage” here or there. Most cannot understand why if an ad was doing well it has to be pulled when someone finds something wrong with it like the word benefits.

  • There is good marketing and not so good. The good gets your point across and avoids anything misleading or that is subject to regulation problems. i've done both. I just like the sound of Equity Release vs. Reverse Mortgage.

  • The problem with the phrase, “equity release,” is that it hides the true nature of the transaction, a mortgage. In some cses, I have seen equity “imprisoned” especially when the borrower had to bring cash to the deal because his existing LTV was too high.

    I have never understood how this debt is that much different from other nonrecourse mortgages other than the option of not making mortgage payments and the principal limit growth concept and its impact on the line of credit, required counseling, term and the annuity like tenure payouts. In fact the phrase “reverse mortgage” doesn't make that much sense either.

  • I am well into the Senior Citizen classification and a very small time RM originator, and all of this word smithing in the previous comment gives rise to my name.It seems to me that instead of trying to nit pic what equity, or what bundle of rights our poor seniors have, we whould all be panicing ove the current attempt by congress and the administration to impose an even bigger and more intrusive federal government on us.
    I hope all y'all (yes, I am a Southern-American)have a great day, knowing that more and more “Big Brother” is watching you.

    Bof

  • befudledoldfool,

    You hit the nail right on the head.

    It seems some people have too much time on their hands. If they took half the time (they spend on these long winded messages)working on their Reverse Mortgage business they would be originating more loans and complaining less!

    • Maybe they can walk and chew gum at the same time. If nobody is made aware of an industry's problems, do they still not exist? After all, you took time off from doing deals to post.

  • Shall I just wade in with more words? What good will adding one more agency to oversee us do? Just look at what the feud between FBI and CIA has done over the years. It gave us Homeland Security and more layers of bureaucracy. Oh yes and a whole other reason to miss flights.

    Let's all get something straight. We are being overseen by multiple Federal and State agencies who have to justify their existence. Could this be developing into a turf war? Coming to a theatre near you. . . .

  • dduck,
    Feeling guilty? What made you think I was talking about you? Five replies to the same post is a little over the top.
    Do you really think the industry needs you to be aware of the problems we are all facing? What are you actually doing anbout it besides shooting off your mouth?
    By the way how many R.M's did you originate in 2009?

    • I am guilty in that I do have time, I don't do RM deals, and am retired.
      I was speaking of others in YOUR industry, of which I am not. My industry, insurance and securities, has plenty of regulations and regulators. And glad to see you can count, did you have to take your shoes off first?” Just kidding. Trying to keep it light here.

    • Traverse,

      Your view is welcomed. You are not by yourself: others do not care for the Comments either but many of us do.

      If you do not like the posts, don't quit your day time job just to post. Tell Admin. Register your dislike and move on. Oops, your competitor just closed that loan that you should have gotten save your posts. Oh, oh, I am wrong. It turns out it was one of those guys who was disqualified because of the new and improved principal limits.

      There is much to learn from a guy who is seeing sales increasing while the principal limits are lower. Please give us some ideas on how we all can do that. Sorry, I have two calls to return right now.

  • Cynic,

    Another one feeling guilty. Maybe you should read the bottom line “ADD NEW COMMENT” It doesn't say anything about adding a novel!
    I have a better idea! Why don't you and Donald Duck just trade e-mails with each other. You two seem to occupy 75% of the space on EVERTY subject!
    And since you asked I have originated more loans in 2009 than 2008. The secret is called hard work not spinning my wheels on blogs all day!

  • Give me a break. It was 9:00 P.M. I just got my shoes off and my feet are sore. I was just checking my e-mail and had to end my day getting beat up by the cynic.
    Happy Holidays!!!

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