Regulatory Changes Attack Smaller Lenders Says Generation Chairman

There is an attack underway on the smaller lenders in the reverse mortgage industry, says Jeff Lewis, Chairman of Generation Mortgage, in his conversation with RMD.

According to Lewis, the proposed net worth and REG Z changes favor the larger depository lenders over the little guys.  “It is not clear why the government is favoring depository businesses in the reverse mortgage process,” says Lewis, “It is going to make it more difficult for the smaller independent provider to maintain themselves.”

Lewis believes that regulation of the industry should be focusing on fostering increased competition rather than further regulating itself, noting that customers are “protected much more by competition than by regulation.” For example, the increase in the number of pages in the necessary disclosures is one example of a regulation that is not likely to have a large effect on consumers. “Is there anybody who can understand the insane reams of paper they’re dealing with?” he quips.


Rather, Lewis believes the best way for the industry to be regulated is for everyone to be competing for business. When multiple loan officers contact a prospective borrower, the borrower has the opportunity to listen to all the products available and find the best deal.  In addition, competition between the brokers can push origination fees lower, amongst other advantages.

Lewis points out that while the big lenders have more lobbying power, Wells Fargo and Bank of America would not be able to exist if not for the independent operators. Reverse mortgages wouldn’t be what they are today if not for the small operators in the field who didn’t have enormous overheads and could spend time proselytizing and educating seniors.

With such a large portion of the industry’s volume coming from the little guys, Lewis adds, “we need to let 1,000 flowers bloom.”

Write to Reva Minkoff

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  • The new GFE's are a joke for reverse. If I were a consumer trying to decipher the new GFE I would'nt have a clue what I was looking at. A simple one page form breaking down all the fees line by line is a little easier to understand when looking at what charges one is incurring. The direction this industry is heading is only going to cost the consumer more money. Eliminating the yield spread in NH has already caused us to not reduce our fees because we have no backend money to compensate for this. It doesn't change the economics of the loan. What it is actually doing is charging the borrower more and the lender keeps the back end money anyways. Seems to be a win win for the lender. It is interesting that the Senator for NH is also one of the Democrats who signed the letter to the Federal Reseve requesting the elimination of YSP. I hope this doesn't happen, but it would ultimately leave the large lenders with the business and the ability to charge even higher fees/costs, because there would be no one there to compete for the business. There is not much common sense in government today. To take a year and a half to develop a GFE such as they did goes to show how much they understand a consumer when they sit down and complete an application. Let's hope for the best that competition is what drives this industry and not the large lenders.

  • Just took my 2nd application this year with the new GFE. The new format is very confusing for seniors. I opted to review with the client both the new and the old 1 page document.

    The new GFE procedures mirrors the foward side HVCC in that the unintended consequences are resulting in more expense and misunderstanding for senior clients.

    Was anyone from the mortgage industry remotely involved in giving input to this new GFE?

  • I agree with Mr. Lewis' comments, as well as with those of John and Sam above!! Limiting competition and YSP to brokers will hurt consumers and increase costs to them.

  • “I'll tell you what, Mr and Mrs Client, do you need money? If you don't , don't do it, if you do, just sign the damn papers that even a piss-ant couldn't understand and wouldn't have written. It is what it is: We've high-lited in yellow where the signatures are required. I try my best to explain the actual pages which require signatures; I'm leaving behing a full almost 50 pages for you to read, if you haven't anything better to do. (Most of my Clients are very, very happy with their decision to get an FHA HECM. (they agree with me, they ain't taking that money into the casket with them—the Government won't let them use it all, unless we have another subprime debacle and the value of your property goes totally into the toilet, which the way those boys and girls on Wall Street are still allowed to act, could happen.). Oh, and by the way, these figures on the printed page don't mean a damn thing, you see: Until the FHA HECM Appraisal is done, we really don't know what the actual numbers will be. Some way to run a program, right?”

  • After almost six years in the business and hundreads and hundreas of applications I am coming to the conclusing that I don't like my job any more. I used to feel like I was helping my customer. I am beginning to feel like I am abusing them. I am trying to complete my first GFE It is a mess. New condo requirements, examinations, RESPA requirements what's next.

  • It's my 33rd year in the mortgage business, and I've been involved with HECMs for 19 of those years, currently as one of the owners of a reverse mortgage-only company (our other owner is in his 43rd year).

    When we began in the business, there were no mortgage brokers involved in the prime loan business — just banks, thrifts and mortgage bankers. Banks weren't interested in residential mortgage lending; thrifts made conventional loans, and mortgage bankers made FHA and VA loans. My partner and I began at nationwide mortgage banking firms, originating FHA and VA loans.

    A number of changes to the mortgage delivery system facilitated the growth of wholesale lending and the origination of the majority of loans by brokers during the past decade. One of these was the decision, by HUD, to allow non-depository mortgage bankers to sponsor loan correspondents. Mortgage bankers, weary of supporting nationwide networks of retail branch offices in an increasingly volatile market, turned instead to the wholesale origination channel, which is more adaptable to changes in market conditions.

    Brokers, as individual entrepreneurs, were more responsive to local market conditions and scaled their business accordingly. They were rewarded with a larger percentage of the income, and the wholesale lender built up servicing efficiently and at lower cost. It worked for everyone, including consumers.

    Brokers have been singled out unfairly as being responsible for the mortgage crisis. Certainly, there is plenty of blame to go around. But brokers did not create the sub-prime loan products; they offered them because the market demanded them and the secondary market had an insatiable appetite for high-yield securities backed by sub-prime loans.

    Now that we have a mess and brokers have been found to be at fault, the solution is to punish or even eliminate the broker. Since small mortgage bankers actually are just glorified brokers, let's eliminate them, too. After all, they don't retain servicing and have no stake in the future performance of the loan.

    Because of the mortgage meltdown, we can't afford to retire; we're being driven out of business, and no one will hire us because we're too old.

  • I agree with Sam Collins and many of my other colleagues. The new RESPA changes with the new GFE is very confusing to the borrowers as well as to originators.

    Surly no one from the Reverse Mortgage industry was consulted. The so called intent behind all the changes is very unclear. To try and explain this to a senior getting on in years is very frustrating for them and us.

    As far as why the regulators are attacking the small lender is obvious. This administration's desire is to eliminate the non banking entities as well as the small community banks as well as a capitalistic sociaty.

    The regulators are coming down harder than ever on our community banks during their auditing procedures and questioning everything they do, even if they are in a “Well Capitalized” classification position. My opinion is the Obama administration would like to see the life blood of our banking history, the community banker go away. Their objectives is to have selected large banks control the depository base of the country as well well as control much of the lending activity in our great nation.

    I feel another part of the administrations plan is to have ownership interest in these large banks and virtually be in control some day of their activities. This is my opinion only, however, it is evident government take over is increasing in our every day life and big business. Banking and lending are one of the largest and most significant areas our government would like to have under its complete control. The future is ours to watch and protect if we have the ability to do it.

    John A. Smaldone

    • I don't agree that the administration desires to have an ownership interest in the banks. In fact, the administration has on many occasions expressed its desire to have TARP funds repaid and to return ownership of the banks to the private sector sooner rather than later. This has been happening on an accelerated basis, and the taxpayers have made making money in the case of banks. Unfortunately, the government (we) may end up losing money on its investment in AIG and the car companies.

      Part of the reason for the mortgage meltdown was the lack of adequate regulatory oversight in the case of certain banking activities, which has been well-documented. The well-intentioned emphasis, by the Clinton and Bush administrations, on increasing home ownership as a matter of public policy certainly played a role in this, especially in the case of the GSEs. But when the private sector benefits from the government taking on risk, as in the case of insured deposits or guaranteed securities, there must be strict regulation and accountability.

  • HECM Dude,

    I appreciate your view and opinion. I still feel the government has a major interest and desire in controlling banking and lending industry in this country. They will do it either through pumping bail out funds in these large banks and do a stock exchange or through legislation.

    As far as the government losing money in AIG, I agree with you 100%. However, the government had no choice other than to pump money into AIG and they still are and still will if it be necessary.

    Thank you for your comment and reply.

    John A. Smaldone

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