New Group to Address Lack of Support for Reverse Mortgages in Washington

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With the possibility of another steep principal limit reduciton, a group of reverse mortgage lenders have participated in the founding of the Coalition for Independent Seniors (CFIS).

Formed to address the lack of support for the HECM program in Washington, DC, CFIS aims to bring all the parties who appreciate what the HECM does for seniors together to educate and influence those policy, legislative, and regulatory organizations who hold the fate of the program in their hands.

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”We have never done what we needed to do in Washington to find the champions our program will need this year,” said Jeff Lewis, Chairman of CFIS during an interview with RMD. Without these champions, the industry is facing another principal limit reduction which many believe could cripple the industry.

For FY 2011, the Office of Management and Budget (OMB) has requested an increase in the annual mortgage insurance premium from 0.50% to 1.25% and a further reduction in the principal limit factors of approximately one to five percent depending on the age of the borrower. Additionally, the OMB is requesting a $250 million subsidy for the HECM program.

If the subsidy request is not met, the US Department of Housing and Urban Development said it will be forced to reduce the principal limit factors by an additional 21%, resulting in a reduction of funds available to seniors by 30%. “Everyone can see the impact of the last principal limit reduction and this will be even more devastating” said Lewis. “This is a historic moment for the HECM program and we all need to mobilize and do our part.”

Even with the current marketplaces ability to lower upfront costs of the program, it doesn’t make up for the principal limit reductions said Lewis. “Proceeds are the most important issue to borrowers.”  With the program as it stands, coalition members estimate 40% of current HECM borrowers would not be able qualify with the program due to the principal limit reductions.

The coalition also has issues with the OMB’s assumptions because they believe the reverse mortgage program doesn’t require the changes requested. The lack of transparency over the OMB’s assumptions are unclear and frustrating says Lewis. “We don’t believe that the program is a money loser.” CFIS isn’t alone either.

Last year, an independent study conducted by IBM on behalf of FHA found the economic value of the HECM program at the end of FY 2009 was $909 million. Indicating it had sufficient capital resources to meet the anticipated liabilities associated with the program.

For FY 2010, IBM estimated the economic value of the HECM program would be $1.875 billion without the 10% principal limit reduction. “As a result, with all other modeling assumptions held constant, the actual economic value of the FY 2010 book-of-business is expected to be greater than the estimate presented in this review,” said IBM.

While the coalition disagrees with the OMB’s assumptions, the closed process and lack of transparency make it impossible to fight.  In the coming months, CFIS is focusing its attention on ensuring the appropriation committee members will approve the subsidy request because at this time it’s not clear anybody will says Lewis.  Other industry leaders are voicing their concern about the future of the HECM program too.

Meg Burns, the former Director of Single Family Program Development at HUD admitted the program’s in a difficult place right now during an interview with the National Reverse Mortgage Lenders Association last week.  Burns, who has always been one of the biggest advocates of the program said it’s much more difficult place now than in her entire time in government. “But I don’t think there’s anything left that I can do to fix that,” said Burns.

Lewis feels a bit different.  During our interview he said the industry understands and sees the massive good the HECM product does for seniors everyday, but that message hasn’t been communicated to people in Washington. “We’ve never connected the wonderful experiences of our customers to those seniors’ representatives – so that they know how important our industry is to the well being of so many members of the fastest growing demographic in the US.”

To help, Lewis is asking the industry to act by encouraging customers to submit stories about how the program has improved their lives through the coalitions website.  Using real stories of the transforming power of the program, the organization can show representatives like David Obey (D – WI), Chair of the House Committee on Appropriations, the enormous benefit the program provides to seniors who want to remain in their home and live independently. Lewis said we need to reach others on the committee including John Olver (D – MA) and Tom Latham (R-IA).

In addition, Senator Patty Murray (D-WA), who is the chair of the Senate subcommittee on the Transportation, Housing and Urban Development, and Related Agencies will play a crucial role in saving the HECM.  “These are the people in Washington that can make a decision to change the future of our industry,” said Lewis.

“Up to this point, when the HECM program is being discussed during the budget process, we have not had champions in the room.” The coalition wants to change that and make sure when it’s being discussed people realize how many people the HECM is helping. “We plan on getting to many people in the House and Senate to find champions for a program that should have many champions.”

Coalition for Independent Seniors

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  • Very interesting to see such an active NRMLA member like Jeff Lewis seize the reins so to speak and get something going. I can't help but wonder if this is being done with NRMLA's blessing or if NRMLA is unhappy about this Coalition.

    I for one, applaud Jeff's initiative.

  • Excellent job Mr. Lewis! Also, I hope you and the other major lenders are working with the PMI companies to develop a HECM alternative. If when using reasonable assumptions reverse mortgages have a positive net effect on the relative insurance reserves, the PMI companies should be interested. Having competition for these insurance premiums will cause FHA to reconsider and adjust their model accordingly.

  • Thank you Mr. Lewis. The website isn't accepting any new members or donations, is there anyway we can contribute besides getting our customers to submit their stories?

    My company isn't one of the biggest but I would still like to contribute and do our part to help financially. Please let us know.

  • Thank you Jeff Lewis – It is good to see a RM advocate ONLY dedicated to the Reverse Mortgage industry with no divided interests as is represented by the NRMLA board. Hopefully Mr.Lewis will find a way to get the RM industry ahead of the PR curve instead of chasing its tail with the give up a little in order not to lose everything policy that NRMLA seems to deploy. Little by little, we seem to be losing everything. Mr. Lewis enterprise deserves everyones enthusiastic support.

  • What a relief to see some real lobbying for the RM cause. I'm sure NRMLA considers the new organization a distraction and taking resource away from the “real” organization. Frankly as someone who has been in the reverse mortgage business for almost a decade and having attended many NRMLA conferences, all I can say is, “it's about time”. As each year goes by, NRMLA becomes more and more useless in representing our interests.

  • I am just not sure how much the negative press can be countered by stories. I have been watching politicos in CA trade punches over the governorship and it is literally a he said she said campaign. You tell your stories and I tell mine. And the negative stories make better press.

    In the end, the only thing that would change the way the HECM program is being nickled and dimed to death is take the accounting out of the Presidential office of the OMB where it was placed by HERA. That is where the errors have been made that have lowered and will continue to lower the benefits we can offer yearly until the seniors who can qualify for the loan won't be able to stomach the funds available at the cost and interest rates. Do you think a completely Democratic Congress will take the forecasting out of the OMB or take the time to understand the fundamental flaws in models OMB has used to diminish the HECM program no matter how we flood them with good stories?

    A good forecaster of the industry said that the government's yearly manipulation of the HECM program may result in the resurgence of the bank backed reverse mortgages. The outlook for seniors on the lower end of the home values would then be somewhat bleak — abandoned by law makers at the most vulnerable time for seniors since the Depression — not a good time in American history to be turning 62, but better than the days when seniors were forced to leave their homes and move in with their families or to seek low income housing and to try to find jobs in a down job market to pay for a bare existence. Hum-m-m. Is it really that much better?

  • This is great. Something that has been sorely missing. When Peter Bell resigns his other Housing association interests, we will know that NRMLA represents only the RM industry.

  • I certainly applaud the crew that is making this happen. But aren't we all members of NRMLA? Shouldn't this be their MAIN focus right now? I hate to talk negatively because I'm not in their shoes, but what exactly are they doing for the industry right now besided roadshows?

  • It does not matter to me who demonstrates the initiative on getting our message out, but it beter damn well be quick.

    Has anybody besides me felt the “despair” in Meg Burns quote? For a long-time staunch and vigorous supporter of the HECM program to make such a cryptic comment is earth shattering.

    I cannot help but wonder if she didn't start looking for other career opportunities so she was long gone when (not if) they make more drastic cuts to the program that will render it virtually useless.

    • I'm on the same page as you reversemaniac. The quote from Meg Burns and her subsequent move still do not sit well with me. To say I'm concerned about the future, particularly after 10/1/2010, would be an understatement.

  • THANK YOU JEFF! I would be much happier paying my annual $2,750 dues to an organization actually doing something on behalf of our industry. I've been disappointed with NRMLA for years…can't even get Peter Bell to return a phone call.

  • THANK YOU JEFF! I would be much happier paying my annual $2,750 dues to an organization actually doing something on behalf of our industry. I’ve been disappointed with NRMLA for years…can’t even get Peter Bell to return a phone call.

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