Echoing the message from a speech at the Mortgage Bankers Association’s annual conference in Atlanta, FHA Commissioner, David Stevens said the reverse mortgage industry needs to shine a light on bad participants and regain the public’s trust.
“I’m a huge fan of reverse mortgages, but I went after and shut down a lender in Hawaii,” he said during the keynote at the National Reverse Mortgage Lenders Association’s annual trade show in New Orleans.
According to the Department of Housing and Urban Development, the lender − Financial Mortgage USA − used an affiliate company to invest borrower proceeds into annuities without their knowledge. While there are regulations to prevent this from happening and reports of this type haven’t turned up in some time, Stevens called on the industry to make the agency aware of inappropriate behavior.
“Lets make sure we get the bad players out of the industry, its not fair to let these people impact your reputation,” he said. This is increasingly important he said, especially as more baby boomers become eligible for the HECM program “the reverse mortgage industry plays an important role in housing going forward.”
As an industry that takes a very pro-active stance in self policing lenders, data from the NMRLA Standards and Ethics Committee shows complaints against reverse mortgage lenders fell by 54% in 2010.
“We had a total of 32 complaints in 2010, the majority were related to deceptive advertising,” said Sarah Hulbert, chair of the NRMLA Standards and Ethics Committee during the conference. The association recently published a new ethics advisory highlighting improper advertising practices seen over the past few months.
During an interview with RMD, Peter Bell, President of NRMLA said deceptive advertising is the “biggest issue we have” in terms of public perception. When lenders use direct mail campaigns that look like “government notices” or checks, “they’re turning the public off to this industry,” he said.
While it’s difficult to know exactly how much it’s happening, “it’s enough for it to color the image of the whole industry and we’re all tarnished by it,” Bell said. “Maybe the lenders are getting a few more loans in the short term, but we’re all paying for it in the long run.”