Reverse Mortgage Legislation Update: January 28, 2010

President Barack Obama gave his first State of the Union address last night where he announced plans to freeze government spending starting in 2011 for three years.

While the President announced that spending related to national security, Medicare, Medicaid, and social security would not be affected by the freeze, it remains unclear how the freeze will affect the HECM program, HUD, and the Federal Housing Administration.

In addition, President Obama included language in his speech in reference to the Financial Services Bill currently awaiting the Senate, noting that, “…If the bill that ends up on my desk doesn’t meet the test of real reform, I will send it back until we get it right. We’ve got to get it right.”


It is likely that this is partly in reference to the inclusion of the Consumer Financial Protection Agency (CFPA) in the final version of the bill. Senator Christopher Dodd (D-CT) is allegedly debating removing the CFPA from the bill in the Senate in order to secure the support of centrist Democrats and Republicans. If President Obama sticks to his promise, he will likely veto any version of the bill that does not contain the CFPA.

In addition, Congressman Joe Sestak, D-PA is campaigning to require lenders to provide specific disclosure statements to seniors before they enter a reverse mortgage and require seniors to meet with a counselor before signing the documents.

Written by Reva Minkoff

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  • Ed,
    Counseling face-to-face was once a requirement at least in our state it was and it was a nightmare. The time to get a senior counseled was 3-4 weeks out. There are not enough agencies and counselors to do this effectively. It would make the entire process much more difficult and greater fall-out because of this requirment. I hope this does not happen “again”.

    • 2545,

      While I fully agree with your assessment on counselor face-to-face meetings, the time has come to revert back to “the old school” and require that either the senior have a face-to-face meeting with the counselor at the counselor's office or the senior meet face-to-face with the loan originator in their home.

      Rather than income, FICO scores, and other assets being the principal criteria to assess qualification, in HECM land the issues are age and principal residence. The “new school” approach of no visual inspection for those two items by the originator needs to be as questioned as the SISA forward mortgage approach is today. The “new school” approach was created solely for the convenience of call center operators, not for the less than 1% of borrowers who could not be visited in their homes for some reason. If the situation is that severe, then an exception system could be developed for approval by HUD instead.

      • Critic,

        Bravo to you! We need to go back to old school on this one, I agree 100% with you. The new school approach was definitely created for the convenience of the call center operations.

        The old way worked just fine. We have to many changes to quickly. We are compromising our industry every time you turn around. When is it going to end. Our seniors pay the price all the time.

        Critic, your comment was well put. You have a good weekend.

        Take care,

        John Smaldone

      • John,

        Thank you.

        There are many of us who have traveled great distances to get a loan or worked it out with a colleague. Where there are real consumer problems, HUD has always considered reasonable alternatives and exceptions. The HUD IG is concerned about fraud; this is one step back in the right direction.

      • Critic,

        You are very welcome, it was my pleasure. I agree with your statement. We
        sure have traveled great distances to get loans worked out with a colleague!
        You have a good weekend.


  • I could be in the minority about this issue…maybe. Although, if a senior does not want to leave their home to do the counseling I do not believe the government should make it a requirment. Many can not because of health reasons some just don't drive the freeways or don't want to go in person. Are we thinking of just allowing the govenment to enforce these changes just to cover our butts further because Obama just wants to be in everything. I am tied of the governments over-protection tendencies?
    At one time our product was at a great advantage because it was a government program. Now I believe its going to be our downfall. They are going to run our program into the ground with the ongoing changes. They do not like the volume of our program which had been growing year over year. As we have already witnessed they have regulated more and more changes which has done exactly what they wanted (less volume).
    Lets reduce the Principal Limits to seniors now and again in late 2010 along with home values already in the tank, create more disclosures then lets make it touture to get the program. Oh, interest rates should begin to go up soon which will help us also. This should reduce the volume a little then lets think of what else we could do…any thoughts?

  • 2545,

    I doubt if you are in the minority.

    However, now I raise another question. At one point the vast majority wanted the national rules to oversee all reverse mortgages. I wonder how people feel about that right now? It was really hard to believe when it was being called for by members of our own industry. National Democrats have never been known for reducing conflicting regulations even at the same level of government.

  • I am concerned that requiring face to face counseling and/or meetings with the Reverse Mortgage Loan Officer will in effect create “red-lining” in rural areas. Whenever possible, I recommend face to face counseling and meet with my clients personally, but the majority come from small towns at unreasonable distances from either counseling agencies or RM LO's. They would be put at a great disadvantage because it is not practical for counselors or loan officers to travel so far to go to them. They prefer using the telephone to meet their needs. Not every one who qualifies for a RM lives in a metropolitan area!

    • Reversegal,

      We have heard this same story many times before. In the last six years has a single counselor ever been required to go to the home of a borrower?

      As to borrowers being in rural parts of the country, I know and oversee loan officers who travel hundreds of miles one way to have a face-to-face meeting with just one borrower. One competitor I know travels sometimes 420 miles one way up to twice a week (from northern to southern California) just to do 1-3 loans each trip. While there is some sympathy for your plight, I also know loan officers who have flown from California to Utah and taken rental cars to remote areas of Utah just to do one HECM. All of the Utah loans generated $2,000 each in origination fees.

      At our office some got licensed with Florida to fly from California to do loans there. Most requests like yours are not requests for the convenience of the senior but rather for the loan officer and for call centers. We look at it in another way; this is just part of what we do as professionals when we agree to provide service for seniors.

      Could some seniors be neglected due to this precaution? No doubt but how many will be left out because of reductions to principal limits. While your plea is understandable, we are in a service industry.

      • Someone who wastes their time and money flying to Utah to take an application from some old bag whose kids may just talk her out of it anyway is just a sign of somebody who is a loser. What you do as a professional when you decide to provide a service? BS, probably most of them don't want your smelly carcass stinking up their living room critic.

      • comeondude,

        Again I am humbled by your insights and clear dedication to serving the senior community. You obviously are far more “professional” than I. You're so insightful I actually lose any sense of meaning when you use that and similar words. In your capable hands, they seem like a foreign language to most of us.

  • Dear Critic,
    I am more than willing to travel 200 miles one way, and have gone much farther when time permits. My clients choose to work with me by phone because I am a trusted representative of a Community Bank with Branches in 4 States. It is physically impossible to meet all my clients face to face-other clients would surely suffer. If this rule is enacted and they do not have the option of a phone application with me, someone else who uses mass marketing to target them will probably charge way more than I do or place them in inappropriate products that pay more on the back end to give them that personal face to face “service”(might I suggest pressure??)

    If a Reverse Mortgage is not the best option, I do not hesitate to recommend that they and/or their family research other options-regardless of how far I have traveled. Contrary to the assumption you have made, it is not just the convenience of this loan officer that drives my comments. This job comes with incredible time pressures; galavanting off to Florida for a short warm weather break and a tax write off is simply not in my business model. I do not see that tactic as self sacrificing for the sake of the client. Please!

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