The Reverse Mortgage Sector: A Well-Regulated Lot

Perhaps nowhere else in the entire housing finance chain can it be said that potential customers are so well informed about the product they may be acquiring than in the reverse mortgage sector. It seems hardly any stone has been left unturned in protecting senior borrowers against misunderstanding, misrepresentations and mistakes.

Among the latest to weigh in on the protection scene is the Office of Thrift Supervision, which issued guidance this summer stating that “institutions should, among other things, require that consumers obtain counseling from a qualified independent counselor, and adopt policies that prohibits steering a consumer to any one particular counseling agency.”

On virtually the same hot day, the Federal Reserve announced its own “final rules regarding loan originator compensation practices, requiring counseling about reverse mortgages before a creditor can impose any nonrefundable fees or close a reverse mortgage loan.”

Advertisement

Only weeks earlier, HUD published “new procedures governing the process for seniors who are counseled for federally insured Home Equity Conversion Mortgages (HECMs).” The new procedures provide more detailed information, which must be provided ahead of the counseling session, including:

–what must be covered,

–who must attend, and

–topics that the counselor can and cannot discuss with the prospective borrower.

Then, there are the states, like Arizona, which has a new law that requires reverse mortgage originators prior to accepting a borrower application, to provide the borrower with a list containing several housing counseling agencies, and collect certification of counseling from the borrower. (Borrowers also must obtain counseling from a HUD-approved housing counselor within six months of applying for a reverse mortgage in Arizona, always a top volume origination state.)

Not to be left out, late last year, the Federal Financial Institutions Examination Counsel (FFIEC) released proposed guidance on reverse mortgage products “encouraging” financial institutions to provide their customers with “clear and balanced information about the risks and benefits of reverse mortgage products.” In addition, the guidance recommends that financial institutions “assist consumers with their product selection decisions by supplying them with promotional materials and other product descriptions that would inform them about the costs, terms, features, and risks of reverse mortgage products.”

Reacting to this one, Shannon Hicks, vice-president of product development at Reverse Fortunes, asks: “Why does the FFIEC have to ‘suggest’ again that customers receive independent counseling? Don’t we already require this? My initial impression is while the FFIEC’s objectives are well intentioned, many of their points duplicate protocols that are already exist and have for some time.”

Just another day in the regulatory jungle for reverse mortgage practitioners.

Written by Neil Morse

Join the Conversation (27)

see all

This is a professional community. Please use discretion when posting a comment.

  • Mr. Koebel,rnrnUnfortunately some of the industry negative reaction has much more to do with the fact that many do not understand where the HECM rules end. Some believe that the HECM rules apply to all reverse mortgages which of course they do not. Some states have made attempts to get close to the HECM standard for all reverse mortgages but very, very few of those state laws look to future federal HECM law, regulations, or mortgagee letters so there will always be some differences. Further some state mortgage laws overrule HECM rules.rnrnAs to your local Representative, I occasionally meet with both a very staunch Republican Congressman and a very liberal Democrat Congresswoman, both of whom are outside of my home District. (Even their staffs know who I am.) Both of these individuals are very responsive and helpful. I am sorry to hear you have not had the same response. If you are a NRMLA member, I strongly urge you to speak with the NRMLA staff regarding the situation. No doubt they can provide (or get you to someone who can provide) some sage advice on your situation.rnrnKeeping in touch with your Representative is an important service to both the industry and the seniors we serve. As the industry has shrunk, those of us who remain need to pick up the slack.rnrnrn

  • Is this a case of the right-hand not knowing what the left hand is doing? Or is it a case of “you can lead a horse to water but you can’t make it drink”. We can provide all the information we want, work to get all the positive press we can, and more – yet some so-called knowledgeable people who we pay for through our taxes don’t seem to do very good research before they issue statements, policies, etc. Their statements, etc, just seem to illustrate the weak research their staff does before issuing their statements. I have a local Rep to the US House that relies heavily on his staff’s research, but his staff doesn’t seem to know how to do research because his statements are all-too-often somewhere out in left field. I’ve tried to offer them good data, information, etc., but “they’ve got it already” – NO, they don’t and that is a concern to me that they don’t seem to want to get it right.

  • Quite frankly, I am surprised that Wells Fargo (I assume with a $300 deposit) would accept a second appraisal with a HECM. That is not uncommon with a proprietary type loan but this is the first time I have heard of it happening with a HECM. Congratulations!!!!rnrnOf course, there are many readers with more experience in the industry than I have. It would be interesting to hear from them.

  • A glaring hole in the system is selection of the property appraiser. After giving my lender a $300 deposit he selected an appraiser who had been certified by his company, though the appraiser was in the opposite end of the county and not familiar with my neighborhood.rnrnThe lender’s appraisal was $400,000. I had an independent appraisal done at my expense by a local appraiser who valued the property at $580,000. The lender “split the difference” and lent on the basis of a $475,000 value.rn rnThis was unfair and in the HUD rules I could find nothing that covered the circumstance.

  • Mark my words 9/11 when counseling rules took affect will be a day of infamy for HECM. Seniors are being asked to answer 50 questions between FIT and Benefits. 10 more about what the reverse is really about you must answer 5 correctly. The counseling will take 2 hours and seniors will hate LO thinking its our fault.I think it is a deliberate ploy to stop reverses and you will not let me post this since you censor anti bureaucaratic posts that’s ok I’ll write a book. My book will be a guide to whats up in America with seniors it will be a best seller.

  • There are fundamental misunderstandings in the industry about what law, regulation, or mortgagee letter applies when. HECM rules do not apply to anything other than HECMs. This is why states have their own laws where federal rules fail to apply HECM type standards to other types of reverse mortgages.rnrnCalifornia has several provisions which also apply to all reverse mortgages including HECMs which are not embodied in the federal rules. Based on the HECM model California requires counseling for all reverse mortgages from a HUD approved counseling agency.rnrnFFIEC is simply stating that the independent counseling standard should apply to all reverse mortgages, a standard not found in any federal law or in many state laws. Federal agencies usually do not make such recommendations unless there is a specific lack. The industry should fully support the FFIEC in this regard. rn

  • Mr. Koebel,rnrnUnfortunately some of the industry negative reaction has much more to do with the fact that many do not understand where the HECM rules end. Some believe that the HECM rules apply to all reverse mortgages which of course they do not. Some states have made attempts to get close to the HECM standard for all reverse mortgages but very, very few of those state laws look to future federal HECM law, regulations, or mortgagee letters so there will always be some differences. Further some state mortgage laws overrule HECM rules.rnrnAs to your local Representative, I occasionally meet with both a very staunch Republican Congressman and a very liberal Democrat Congresswoman, both of whom are outside of my home District. (Even their staffs know who I am.) Both of these individuals are very responsive and helpful. I am sorry to hear you have not had the same response. If you are a NRMLA member, I strongly urge you to speak with the NRMLA staff regarding the situation. No doubt they can provide (or get you to someone who can provide) some sage advice on your situation.rnrnKeeping in touch with your Representative is an important service to both the industry and the seniors we serve. As the industry has shrunk, those of us who remain need to pick up the slack.rnrnrn

  • Is this a case of the right-hand not knowing what the left hand is doing? Or is it a case of “you can lead a horse to water but you can’t make it drink”. We can provide all the information we want, work to get all the positive press we can, and more – yet some so-called knowledgeable people who we pay for through our taxes don’t seem to do very good research before they issue statements, policies, etc. Their statements, etc, just seem to illustrate the weak research their staff does before issuing their statements. I have a local Rep to the US House that relies heavily on his staff’s research, but his staff doesn’t seem to know how to do research because his statements are all-too-often somewhere out in left field. I’ve tried to offer them good data, information, etc., but “they’ve got it already” – NO, they don’t and that is a concern to me that they don’t seem to want to get it right.

  • Quite frankly, I am surprised that Wells Fargo (I assume with a $300 deposit) would accept a second appraisal with a HECM. That is not uncommon with a proprietary type loan but this is the first time I have heard of it happening with a HECM. Congratulations!!!!rnrnOf course, there are many readers with more experience in the industry than I have. It would be interesting to hear from them.

  • A glaring hole in the system is selection of the property appraiser. After giving my lender a $300 deposit he selected an appraiser who had been certified by his company, though the appraiser was in the opposite end of the county and not familiar with my neighborhood.rnrnThe lender’s appraisal was $400,000. I had an independent appraisal done at my expense by a local appraiser who valued the property at $580,000. The lender “split the difference” and lent on the basis of a $475,000 value.rn rnThis was unfair and in the HUD rules I could find nothing that covered the circumstance.

  • Mark my words 9/11 when counseling rules took affect will be a day of infamy for HECM. Seniors are being asked to answer 50 questions between FIT and Benefits. 10 more about what the reverse is really about you must answer 5 correctly. The counseling will take 2 hours and seniors will hate LO thinking its our fault.I think it is a deliberate ploy to stop reverses and you will not let me post this since you censor anti bureaucaratic posts that’s ok I’ll write a book. My book will be a guide to whats up in America with seniors it will be a best seller.

  • There are fundamental misunderstandings in the industry about what law, regulation, or mortgagee letter applies when. HECM rules do not apply to anything other than HECMs. This is why states have their own laws where federal rules fail to apply HECM type standards to other types of reverse mortgages.rnrnCalifornia has several provisions which also apply to all reverse mortgages including HECMs which are not embodied in the federal rules. Based on the HECM model California requires counseling for all reverse mortgages from a HUD approved counseling agency.rnrnFFIEC is simply stating that the independent counseling standard should apply to all reverse mortgages, a standard not found in any federal law or in many state laws. Federal agencies usually do not make such recommendations unless there is a specific lack. The industry should fully support the FFIEC in this regard. rn

  • There are fundamental misunderstandings in the industry about what law, regulation, or mortgagee letter applies when. HECM rules do not apply to anything other than HECMs. This is why states have their own laws where federal rules fail to apply HECM type standards to other types of reverse mortgages.rnrnCalifornia has several provisions which also apply to all reverse mortgages including HECMs which are not embodied in the federal rules. Based on the HECM model California requires counseling for all reverse mortgages from a HUD approved counseling agency.rnrnFFIEC is simply stating that the independent counseling standard should apply to all reverse mortgages, a standard not found in any federal law or in many state laws. Federal agencies usually do not make such recommendations unless there is a specific lack. The industry should fully support the FFIEC in this regard. rn

  • Mark my words 9/11 when counseling rules took affect will be a day of infamy for HECM. Seniors are being asked to answer 50 questions between FIT and Benefits. 10 more about what the reverse is really about you must answer 5 correctly. The counseling will take 2 hours and seniors will hate LO thinking its our fault.I think it is a deliberate ploy to stop reverses and you will not let me post this since you censor anti bureaucaratic posts that’s ok I’ll write a book. My book will be a guide to whats up in America with seniors it will be a best seller.

  • A glaring hole in the system is selection of the property appraiser. After giving my lender a $300 deposit he selected an appraiser who had been certified by his company, though the appraiser was in the opposite end of the county and not familiar with my neighborhood.rnrnThe lender’s appraisal was $400,000. I had an independent appraisal done at my expense by a local appraiser who valued the property at $580,000. The lender “split the difference” and lent on the basis of a $475,000 value.rn rnThis was unfair and in the HUD rules I could find nothing that covered the circumstance.

      • Quite frankly, I am surprised that Wells Fargo (I assume with a $300 deposit) would accept a second appraisal with a HECM. That is not uncommon with a proprietary type loan but this is the first time I have heard of it happening with a HECM. Congratulations!!!!rnrnOf course, there are many readers with more experience in the industry than I have. It would be interesting to hear from them.

  • Is this a case of the right-hand not knowing what the left hand is doing? Or is it a case of “you can lead a horse to water but you can’t make it drink”. We can provide all the information we want, work to get all the positive press we can, and more – yet some so-called knowledgeable people who we pay for through our taxes don’t seem to do very good research before they issue statements, policies, etc. Their statements, etc, just seem to illustrate the weak research their staff does before issuing their statements. I have a local Rep to the US House that relies heavily on his staff’s research, but his staff doesn’t seem to know how to do research because his statements are all-too-often somewhere out in left field. I’ve tried to offer them good data, information, etc., but “they’ve got it already” – NO, they don’t and that is a concern to me that they don’t seem to want to get it right.

  • Mr. Koebel,rnrnUnfortunately some of the industry negative reaction has much more to do with the fact that many do not understand where the HECM rules end. Some believe that the HECM rules apply to all reverse mortgages which of course they do not. Some states have made attempts to get close to the HECM standard for all reverse mortgages but very, very few of those state laws look to future federal HECM law, regulations, or mortgagee letters so there will always be some differences. Further some state mortgage laws overrule HECM rules.rnrnAs to your local Representative, I occasionally meet with both a very staunch Republican Congressman and a very liberal Democrat Congresswoman, both of whom are outside of my home District. (Even their staffs know who I am.) Both of these individuals are very responsive and helpful. I am sorry to hear you have not had the same response. If you are a NRMLA member, I strongly urge you to speak with the NRMLA staff regarding the situation. No doubt they can provide (or get you to someone who can provide) some sage advice on your situation.rnrnKeeping in touch with your Representative is an important service to both the industry and the seniors we serve. As the industry has shrunk, those of us who remain need to pick up the slack.rnrnrn

string(93) "https://reversemortgagedaily.com/2010/09/15/the-reverse-mortgage-sector-a-well-regulated-lot/"

Share your opinion