Vague Restrictions Prevent HECM From Becoming Part of Retirement Plan

NewImageThe Department of Housing and Urban Development restrictions against cross selling products with reverse mortgages is “extremely open ended and vague” according to Jeff Lewis, Chairman of Generation Mortgage.

Lewis told National Mortgage News he doesn’t expect to see any sort of rule from HUD since the agency has no authority over insurance or securities firms.

The prohibition stems from the Housing and Economic Recovery Act (HERA), which Congress passed and states that “neither mortgagees nor any other party may require mortgagors to purchase insurance, annuities or other additional products as a requirement for, or a condition of, eligibility for HECM insurance.”


As a result, banks cannot market HECMs against their existing customer base because of the cross selling prohibition and are being marginalized when it comes to retirement planning.

“We are trying to create opportunities for seniors to use reverse mortgage as part of a comprehensive financial plan that maximizes their financial health,” Lewis said.

HECM Mortgage Chief: Reverses a Last Option for Many


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  • The referenced article is only one perspective. There is nothing wrong with wanting to see the program changed; however, that does not mean everyone in the industry agrees with the proposed change or sees it as an improvement.

    What is the matter with the current rule? It is a safeguard and is preventing the terrible headlines about the well documented abuse which occurred when reverse mortgage originators were permitted to provide both financial and insurance products and simultaneously the means to fund it. Why would we return to the old potentially abusive way of doing business? The promoter is not suggesting safeguards and his idea would only result in the same kind of abuses.

    Seniors are a protected class. There are reasons why this type of protection is needed. The so called McCaskill amendment needs to stay in place; however, it needs clarification.

    Both NRMLA and the Fed have tried to bring that clarification. In deference to the CFPB, the Fed withdrew its proposed rule. I wish the Fed rule was codified into the US Code. It’s a great rule. The CFPB needs to adopt it as the Fed proposed it.

    Under existing law when rescission ends, originating companies seem free to offer insurance and financial products. The NRMLA and Fed cooling off period of 10 days is an improvement and a great idea. NRMLA did a great job putting the concept together. Let’s not change it.

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