Reverse Mortgage Lenders Figuring Out Their Next Move

As the landscape for reverse mortgage brokers continue to change with new third party rules from the Department of Housing and Urban Development, companies are looking to see how they can be successful in the future.

“Little by little, everyone is trying to find their way and figure out what the next move is and overcome certain obstacles and re-invent themselves,” said Jason Levy, CEO of Guardian First Funding Group.  “Figure out how to navigate through the tumultuous times we’ve seen over the last few months.”

Levy’s company recently announced an asset deal with Urban Financial that is expected to close early next year and provides significant backing it can use to grow the Robert Wagner brand.  But not every company has these types of opportunities and leaves the future of mortgage brokers up in the air.

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“It’s going to be very difficult for mortgage brokers to be successful with all the new regulations,” said Dennis Haber, EVP of Agency for Consumer Equity.

New regulations seem to favor lenders that use their own funds to close, which is why the industry has seen companies like Great Oak Lending Partners join lenders that can help with the transition from broker to banker.  While new third party originator guidelines from HUD don’t look as bad as Haber initially thought, the secondary market execution currently available poses a problem for brokers.

“The incentives seem to dictate that lenders could say we are better off decreasing wholesale and increasing retail because of the secondary market execution,” he said.  What worries Haber most though, is the threat of additional scrutiny on the industry from politicians, especially at the state level.

“We as an industry need to show on the state and federal level that we’re policing ourselves,” he said.  “We need to be pro-active, making sure that everybody is working on best practices to ensure everyone is doing what’s best interests of the borrower.”

If the industry can prove to legislators that it’s already already doing that, Haber hopes legislators will take a collaborative approach, rather than “legislate and make new laws about things they don’t totally understand.”

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  • This is in response to two RMD articles: WSJ: Consumer Protection Agency Starts Looking Into Reverse Mortgages & Reverse Mortgage Lenders Figuring Out Their Next Move.
    The Journal article focused on the Consumer Union’s report castigating unscrupulous reverse mortgage lenders. Peter Bell, president of the National Reverse Mortgage Lenders Association questioned the Union’s findings. His argument seems to be that regulation is part of the process that helps the Federal Housing Authority-insured reverse mortgage programs succeed.
    As far as lenders figuring out their next move, I have some suggestions. Start by engaging NRMLA in convincing the HUD secretary and FHA commissioner to change their stance before Congress in proposing and passing legislation to carve out over 400,000 stock cooperative owners from the reverse mortgage market.
    These are senior dwelling-unit owners who qualified for their owners-occupied purchases because of their low- to moderate-income status. These owners had access to their investment equity for almost ten years under a HUD-FHA sponsored Home Saver reverse mortgage package. This access was pulled out from under them without a replacement package immediately after the Housing and Economic Recovery Act of 2008 was signed into law by George W. Bush on July 30, 2008.
    The HERA enabled HUD-FHA to implement reverse mortgages for single family homes, condominiums and stock cooperatives. Future legislation sponsored by HUD-FHA deleted stock cooperative from this imperative. Since such implementation is merely descretionary, HUD has taken no action to implement a reverse mortgage package for stock co-op owners.
    These senior owners have been left, in effect, economically twisting in the wind. They have no way to access their dwelling-unit investment during the worst and longest economic downturn since the Great Depression. If, as Barbara Stucki, VP of the National Council on Aging says, reverse mortgages will become more popular during times of “daunting” economic reality for “tapping the equity of their homes,” what is the National Council on Aging doing for co-op owners?
    Knowing that Peter Bell and NRMLA have made heroic efforts to influence a FHA reverse mortgage co-op package, yet after the HUD secretary sent a message in response to petitions from our community’s HECMs for CO-Ops GROUP at Laguna Woods, exactly what has NRMLA done lately? In addition, does Dennis Haber, EVP of Agency for Consumer Equity, have any concern about the fact that HUD-FHA is ignoring the financial needs of senior co-op owners who sit on their inaccessible equity?
    Some of these co-op owners bought under the illusion that reverse mortgages would be accessible. Now they are in financial difficulty unable to include their dwelling equity in their financial planning. Because of this reality they are vulnerable to losing their investment. Does no one care?
    After all, much of housing ownership is reflected in paper. And at LagunaWoodsVillage.com, co-op owners sit in dwellings merely blocks away from condo neighbors who reside in the same model homes, yet they have access to FHA- insured reverse mortgages while co-op owners do not.
    Many ReverseMortgageDaily.com articles belabor lender marketing—access to senior borrowers. My question is: What are you doing to add over 400,000 co-ops in your marketing pool?
    For those lenders figuring out your next marketing move: Why aren’t you using NRMLA to press HUD-FHA to belatedly do the right thing for these senior co-op owners?
    Barbara B. Howard ChangeManager@comline.com; Cofounder HECMs for CO-OPs GROUP at Laguna Woods CA

    • Barbara,

      Oops!

      I apologize. I forgot about Jim and Marilu Veale who have an article in Life after 50 which circulates in Laguna Woods. I have heard that they did three Home Keepers in Laguna Woods for coop owners and they tell me Angela Conrad did that many or more. They knew nothing about the number that Raymond Denton may have completed.

  • This is in response to two RMD articles: WSJ: Consumer Protection Agency Starts Looking Into Reverse Mortgages & Reverse Mortgage Lenders Figuring Out Their Next Move.
    The Journal article focused on the Consumer Union’s report castigating unscrupulous reverse mortgage lenders. Peter Bell, president of the National Reverse Mortgage Lenders Association questioned the Union’s findings. His argument seems to be that regulation is part of the process that helps the Federal Housing Authority-insured reverse mortgage programs succeed.
    As far as lenders figuring out their next move, I have some suggestions. Start by engaging NRMLA in convincing the HUD secretary and FHA commissioner to change their stance before Congress in proposing and passing legislation to carve out over 400,000 stock cooperative owners from the reverse mortgage market.
    These are senior dwelling-unit owners who qualified for their owners-occupied purchases because of their low- to moderate-income status. These owners had access to their investment equity for almost ten years under a HUD-FHA sponsored Home Saver reverse mortgage package. This access was pulled out from under them without a replacement package immediately after the Housing and Economic Recovery Act of 2008 was signed into law by George W. Bush on July 30, 2008.
    The HERA enabled HUD-FHA to implement reverse mortgages for single family homes, condominiums and stock cooperatives. Future legislation sponsored by HUD-FHA deleted stock cooperative from this imperative. Since such implementation is merely descretionary, HUD has taken no action to implement a reverse mortgage package for stock co-op owners.
    These senior owners have been left, in effect, economically twisting in the wind. They have no way to access their dwelling-unit investment during the worst and longest economic downturn since the Great Depression. If, as Barbara Stucki, VP of the National Council on Aging says, reverse mortgages will become more popular during times of “daunting” economic reality for “tapping the equity of their homes,” what is the National Council on Aging doing for co-op owners?
    Knowing that Peter Bell and NRMLA have made heroic efforts to influence a FHA reverse mortgage co-op package, yet after the HUD secretary sent a message in response to petitions from our community’s HECMs for CO-Ops GROUP at Laguna Woods, exactly what has NRMLA done lately? In addition, does Dennis Haber, EVP of Agency for Consumer Equity, have any concern about the fact that HUD-FHA is ignoring the financial needs of senior co-op owners who sit on their inaccessible equity?
    Some of these co-op owners bought under the illusion that reverse mortgages would be accessible. Now they are in financial difficulty unable to include their dwelling equity in their financial planning. Because of this reality they are vulnerable to losing their investment. Does no one care?
    After all, much of housing ownership is reflected in paper. And at LagunaWoodsVillage.com, co-op owners sit in dwellings merely blocks away from condo neighbors who reside in the same model homes, yet they have access to FHA- insured reverse mortgages while co-op owners do not.
    Many ReverseMortgageDaily.com articles belabor lender marketing—access to senior borrowers. My question is: What are you doing to add over 400,000 co-ops in your marketing pool?
    For those lenders figuring out your next marketing move: Why aren’t you using NRMLA to press HUD-FHA to belatedly do the right thing for these senior co-op owners?
    Barbara B. Howard ChangeManager@comline.com; Cofounder HECMs for CO-OPs GROUP at Laguna Woods CA

  • Barbara,

    Your comment is filled with the same falsehoods you have been promoting in your last few comments. That is disgraceful. It could do much unnecessary harm to the coop owners in Laguna Woods.

    You can go to the Internet and search for 12 U.S.C. 1715z-20(b)(4) and as long as the webpage is up to date you will find that coops are still eligible for HECMs. I asked before for the citation where there has been a law passed after HERA which deleted coops from the eligible properties and you have failed to cite that legislation.

    Your claim is also false that FHA/HUD offered any reverse mortgage to the coop owners in Laguna Woods before HERA. What was offered for a small window was the Fannie Mae Home Keeper. While applications for new mortgages under that program officially terminated on 12/31/2008, that program was terminated for Laguna Woods coop owners in 2007. It was an experiment between Financial Freedom and Fannie Mae which ended without renewal. Ask Raymond Denton (“rainmand”) or Angela Conrad about that situation; they are reverse mortgage originators who specialize in providing reverse mortgages to Laguna Woods residents. As I hear it, they are experts on that topic.

    I have personally received dozens of calls from coop owners in Laguna Woods since HERA. I have advised them that if their situation is as desperate as they paint it, they should consider moving. With homeowner association dues exceeding $500 per month, living in those units is not a wise financial decision for many I have spoken to.

    Even if HUD issues a Mortgagee Letter, that may just begin the fight to get Laguna Woods coop owners HECMs on their properties. The next issue will be whether any lender feels comfortable placing a HECM on such properties based on California law and the terms of the yet to be issued Mortgagee Letter. Even if lenders made HECMs available for Laguna Woods coops, the next question will be if the homeowners association qualifies. Last week we had to tell a condo owner near the entry to Griffith Park in LA that her homeowners association refused to meet the FHA minimum standards even if that meant no FHA loan could go on those units. To be clear the Mortgagee Letter is but the start of the hurdles which must be met in order for the Laguna Woods coop owners to qualify for HECMs.

    You asked that I email you over a month ago. I immediately responded but am still waiting a response.

  • >>These owners had access to their investment equity for almost ten years under a HUD-FHA sponsored Home Saver reverse mortgage package.

    Actually, it was Fannie Mae’s Homekeeper program – and I agree, the program was terminated too soon.

    >>Does no one care?

    Many of us care, and it bums me there’s nothing I can do to to encourage HUD to make it happen … I’m so disappointed with HUD. I understand putting together the program is challenging, but we’re close to 2 1/2 years since HR 3221 was signed. It wouldn’t be so frustrating if HUD provided updates. But HUD doesn’t say anything solid – we’re left hanging, wondering what’s happening.

    Personally, I feel HUD should have been applying their resources to getting the co-op program implemented and released, instead of developing a new HECM program.

  • >>Even if lenders made HECMs available for Laguna Woods coops, the next question will be if the homeowners association qualifies.

    Mr. Critic is definately correct about that, and there’s no telling how long that process will take. Angella told me she’s already been working on this part of the process – all she needs now is the Mortgagee Letter.

    And there’s also another mandatory formality most Lenders aren’t aware of, and if you’re a Loan Officer preparing to assist co-op homeowners in Laguna Woods Village, you would take care of this prerequisite now. United Laguna Woods Mutual has a “Recognition Agreement” that needs to be completed by each Lender prior to being able to offer mortgages to the co-op members. The agreement is 18 pages and can be requested from Pamela Bashline; Community Services Manager, via either pamela.bashline@pcm-inc.org or via fax at 949-268-2523. Upon receipt of the completed document, United Laguna Hills Mutual records the agreement with the Orange County Recorder’s Office, forwards a copy to your office, and then you’re enabled to offer Reverse Mortgages.

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