Reverse Mortgage Industry Can’t Be Hiding from Increased Scrutiny says Lewis

As implementation of Dodd-Frank reform bill gets underway, reverse mortgage lenders are preparing for whatever regulators might throw at the industry.

While the last few years have brought on many changes and increased scrutiny, one executive is confident about the way the industry operates.

“We’re happy having the industry being hyper regulated,” said Jeff Lewis, Chairman of Generation Mortgage in an interview with RMD during the National Reverse Mortgage Lenders Association annual trade show.  “We don’t rip anybody off and we go out of our way to make sure that people are treated correctly.”

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As part of the Dodd-Frank bill, the Consumer Financial Protection Bureau has the authority to issue regulations, orders, or guidance that apply to reverse mortgages.

The amendment was pushed hard by Rep. Representative Dina Titus (D-Nev) – lost her re-election earlier this month – who said, “while this financial product can be appropriate for some, it is important that the reverse mortgage lending industry be subject to appropriate regulation to promote transparency and sufficient consumer protections.”

Within the first year, the Bureau is also required to conduct a study on reverse mortgages to identify deceptive practices and figure out whether suitability standards are necessary.

Lewis told RMD the company doesn’t fear the report, “all it does is make the industry more easily sold to consumers.”

What bothers him most is the fact that because a reverse mortgage is a complicated transaction, something bad must be going on.  “If this industry was actually dirty, we would all be out of business,” he said, “we can’t be hiding.”

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  • Good day,

    The consumer protection bureau keeps popping up these days. Why for the past two years has the reverse mortgage product along with the people serving it been the topic of the mortgage industry where fraud is concerned?

    We have been dragged through many changes, regulations implemented upon us, news media battering and the federal government determined to try and make the program go away.

    I am sorry, but there is no other way I can look at it. Jeff did a great job answering the questions and using his diplomacy. However, the financial regulatory reform bill is the most dangerous and damaging bill ever passed. The consumer protection bureau is part of this bill.

    The CPB will have the power to regulate the reverse mortgage industry right out of business, is this what the intentions are? The one program that is the saving grace for our seniors, the federal government wants to do a way with it through deceptive means. This is how I feel, I am speaking for no one but myself.

    It was only four years ago that the reverse mortgage was being billed as the most highly regulated mortgage product on the market. Those in the industry took pride in saying to our seniors, “The reverse mortgage is a highly federally regulated program for your protection”. Is this no longer true, how did we all become dishonest mongers ready to prey on our seniors? All this in a few years, this does not say much for the regulators and the federal government (HUD).

    Yes, we have more people in the industry today perpetrating fraud on the seniors. Who created the temptation, who changed the industry so in the past two years. Four years ago, I could not make any where near the amount of money a loan originator can make today. I was proud to say that we were regulated by HUD as to how much we can make. Not today, the back end fees are higher than ever, loan officers now get portions of both, the origination fees and the gain on sale premiums. What happened to HUD controlling what an originator could make, how did we get where we are today.

    Why I have seen loan originators make as much as $10,000 or more on a loan. I started in the reverse mortgage industry over 10 years ago, I never saw a pay day like that on one loan, 3 to 4 loans, yes but not on one loan.

    I like what Jeff said about being hyper regulated and that “We don’t rip anybody off and we go out of our way to make sure that people are treated correctly.” That was good, however, we were regulated, regulated better and more efficiently than we are now or will be in the future. It is sad to see what is being done to this program and our seniors in this highly corrupted political environment we are in!

    Thank you,

    John A. Smaldone

  • With all due respect to John and Jeff, I am not so sure things are as bad as John paints them or as great as Jeff proclaims. I know I am not ready to surrender to the whims of “well meaning” and not so well meaning regulators and legislators.

    It is not a corrupt government or necessarily greedy lenders, which has led to the higher compensation which we see to some degree particularly on fixed rate products. With Fannie Mae driving our business away first practically and then officially, smart lenders found an outlet which not only accepts our products but pays premiums for our fixed rate products.

    While there may be some steering to more profitable products for primarily compensation purposes, lenders have also stepped up to return some of the profits to borrowers through lower upfront costs and also to reward their sales forces for selling the products. That is a win, win, win, UNLESS again seniors are being inappropriately steered into obtaining those specific products. But even then one has to wonder if counseling is doing its job.

    Fixed rate products are attractive to borrowers because they are easier to understand and to grasp their financial implications. They also produce a sense of peace mind since they are immune to interest rate increases. Even its lump-sum upfront disbursement requirement makes seniors feel they are in control of proceeds rather than some “big bank” servicer. Sometimes it feels like seniors are so set on a fixed rate product that when you try to point out the benefits of the adjustable rates, they react like you are trying to “trick” them into an adjustable rate product for some nefarious reason.

    Since neither lenders nor originators receive any compensation until after a reverse mortgage is funded, we are not, cannot be, and should not be considered independent and unbiased when it comes to the determination of product suitability. Many regulators and legislators seem determined to make this our responsibility. This is why the bold statements of Jeff seem dangerously inappropriate.

  • Critic,

    I usually don’t disagree with you but on this issue, we have differences. However, a lot of what you said in your comment I do agree with.

    Unfortunately things are as bad as I paint them, or should I say could be as bad. Not only for the reverse mortgage industry but for the mortgage industry on a whole.

    The Dodd-Frank bill or the Financial Regulatory Reform Bill or what ever you want to call it is trouble, big trouble for the entire financial world we live in.

    The consumer Protection Bureau, which is derived from the Financial Regulatory Reform Bill will be one of the most powerful group of people ever appointed to a government committee I have ever seen.

    Critic, this is why I am painting the picture as bleak as I am. Until the Financial Regulatory Bill can be revoked or repealed, what ever you want to call it, the future is very bleak. This bill virtually can control our entire financial system, right down to IRA’s and 401-K’s. The bill is disastrous.

    What is so bad for our industry is the feds are after the tails of the reverse mortgage industry and this committee is the vehicle to accomplish what ever they have in mind! We are facing treacherous people here, I am very fearful what we will see coming at us down the road. Unless we get the senate and congress to do away with this bill and start all over again, from scratch, with financial reform, we are all in trouble.

    Try reading the bill, not only is it it very long but the way it is written is cute. Cute to the point that it is very difficult to read and understand. Only a very few knows what it really says and the harm it can cause. That is my story for the day. It is always a pleasure to have discussions with you Critic, you are a very knowledgeable individual and you have my respect but trust me on this one!

    Thank you,

    John A. Smaldone

    • John,

      I prefer your view over that of Jeff. I am far more skeptical than he is just not as much as you. Yes, I believe the bureau will be abused and used as a whip. What agencies are not?

      To undo this law will require a different Congress and most likely, a different President than we will have for the next few years. As long as President Obama resides in the White House, it is very doubtful if repeal will occur without overriding a presidential veto. I think that is way too much to expect in the near future.

      Right now is the time to be voicing support and opposition on specific issues and documenting the actions which represent Bureau abuse and its overreaching activities. As to her influence on the Bureau, I view Ms. Elizabeth Warren much the same way as I do Arthur Samish, the puppet of her supporters while all of the time the puppet master controlling the strings of the Bureau.

      Supreme Court Chief Justice (and former California Governor) Earl Warren (no relation to Ms. Warren) once said of Mr. Samish: “On matters that affect his clients, Artie unquestionably has more power than the governor.” Or as Time quotes Artie as saying: “I’m the governor of the legislature; to hell with the governor of California…”

      As Artie is remembered as the most powerful California legislator Californians never elected, Ms. Warren will be remembered as the most powerful leader of the Bureau whom the Senate never approved.

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