NRMLA Proposes New FHA Approval for HECM Mortgagees

The National Reverse Mortgage Lenders Association is proposing that the US Department of Housing and Urban Development create a separate category for smaller mortgagees, whose principal activity is the origination of reverse mortgages.

The request comes after HUD’s proposed rule to raise net worth requirements and eliminate the approval of FHA loan correspondents.

The trade association is concerned that removing approval requirements for FHA Loan Correspondents for reverse mortgages could “enable companies and individuals lacking sufficient oversight, experience and expertise to originate HECM reverse mortgage loans,” said Peter Bell, NRMLA president in a comment letter to HUD.

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In addition, NRMLA states that due to changes made by the Housing and Economic Recovery Act of 2008, HUD is required by law to review, approve and monitor all entities that will participate in the origination of the FHA-insured HECMs, even if such entities are not FHA-approved Direct Endorsement lending mortgagees.

The association also anticipates that raising net worth requirements to $2.5 million combined with making sponsors responsible for non-approved entities will result in a reduction of the number of smaller HECM loan originators that focus on serving seniors.   

“Some of those very same Loan Correspondents, that will no longer have a sponsor, also will not have the capital to make the financial commitment to become an FHA-approved mortgagee,” said Bell.

NRMLA is requesting that HUD establish an FHA approved HECM mortgagee which requires a net worth of no more than $250,000 (current mortgagee requirement) and whose principal activity is the origination of reverse mortgages.

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  • $250,000 that's not much–just the value of one home perhaps: Wonder how
    many of Peter (…) (…..) Bell's Lobby Group meet (Or fail to meet) that
    standard. Would be interesing to know how many FHA HECM Reverse Mortgages those in this catagory originated in 2009. Also, how many were
    charged (and convicted) of loan or advertising fraud? I guess the real question is will Seniors be better off with this rule change? Let's hear it
    from all of your protectors of the status quo.

  • All I know is one of my competitors here, who is also a friend, would be out of business. That's all they do and are a small company. They do things the right way and it would be sad to lose them. Most of that business would end up in the corporate giants hands.

  • Thanks, TexasReverse, for your response: Comments like yours are needed to inform HUD that their proposed change may force “good” people, who serve Seniors honorably and well, out of the FHA HECM business. Perhaps, just perhaps, Peter (…) (……) Bell's NRMLA suggestion is a good idea and should be thoroughly considered by HUD.

  • I think Peter's Suggestion is right on. It is designed to protect the small originator. Without his suggestion of a separate category the small originator would be out of business. The 250k net worth is standard and why should they expect to be treated any different than everyone else? Sure beats 2.5 million!

  • Good evening,

    I feel Peter Bell's proposal makes sense. First off, one of Peter's conditions are that the company specialises in Reverse Mortgages. This in itself is a major plus for our senior citizens and the industry. If the firm specializes in Reverse Mortgages, they know what they are doing and most likeley will operate under the proper code of armer.

    Also, the $250,000 net worth requirement has always been the criteria for a “Full Eagle” lender for years. The size of the company does not neccasarily determin how honest they are in thier dealings with seniors. I would rather deal with a company that has a $250,000 net worth that specializes in reverse mortgages than a company with a $3 Million net worth that only does one or two reverses a month.

    I say, good job Peter!

    John Smaldone

  • So just what does “specializing in reverse mortgages” mean……is that the typical broker who hangs up a sign saying “we specialize in reverse mortgages”…….Unfortunately the “good” always suffers at the hands of the “bad” in any industry as evident in what has happened over the last year in this industry. I can't help but feel that Peter Bell position has much more to do with his membership dues than anything else. Yes there are very very good small companies that will suffer…but the “good guys” are wanted and needed everywhere and unfortunately the small guys will go the way of the corner drugstore, hardware store, and corner market.

  • So just what does “specializing in reverse mortgages” mean……is that the typical broker who hangs up a sign saying “we specialize in reverse mortgages”…….Unfortunately the “good” always suffers at the hands of the “bad” in any industry as evident in what has happened over the last year in this industry. I can’t help but feel that Peter Bell position has much more to do with his membership dues than anything else. Yes there are very very good small companies that will suffer…but the “good guys” are wanted and needed everywhere and unfortunately the small guys will go the way of the corner drugstore, hardware store, and corner market. rn

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