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.
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.