Industry Hopes CFPB Will Establish Separate Disclosures for Reverse Mortgages

The Consumer Financial Protection Bureau’s first round of new mortgage disclosures drafts are out and industry trade groups are starting to react.

The goal behind the overhaul of the old disclosures is to simplify and combine the Truth in Lending and Good Faith Estimate into one form, says the CFPB.  While it’s hard to argue with that goal, there is plenty of concern that the forms may stifle innovation for new products.

“Changes are expensive to operationalize,” David Stevens, former FHA commissioner and current Mortgage Bankers Association president and CEO, said during an interview with Bloomberg News. “We are not against this, but we want to study the forms,” he said.

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Policy and regulatory experts agree and wonder whether the Bureau intends to impose substantiative changes in existing law, according to Patton Boggs.

“A concern of lenders is that a new integrated disclosure form could be used to regulate products—that is, lenders would only be able to offer products that fit within the confines of the disclosure form,” writes the group.

That has the potential to pose problems for lenders offering reverse mortgages, but the National Reverse Mortgage Lenders Association is working to make sure it doesn’t happen.

“We feel that disclosures designed explicitly for reverse mortgages should be developed, rather than trying to shoe-horn them into forward mortgage disclosures,” said Peter Bell, president of NRMLA in an email to RMD. “Our compliance committee is being tasked with developing recommended content and format for a reverse mortgage disclosure for NRMLA to set forth in a proposal.”

During the public comment period in response to the forms, the CFPB received more than 14,500 individual comments. The Bureau said it plans to conduct five rounds of evaluation and revision through September 2011, at which point it will select one disclosure form and then refine it.

While the industry currently release only of reverse mortgage products insured by the Federal Housing Administration, it’s likely others will be developed in the future. Earlier this week, HomEquity Bank, the leading provider of reverse mortgages in Canada, announced it was lowering the minimum age for its reverse mortgage product to 55.

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  • While the CFPB wants “one size fits all,” the insignificant ABA (not the American Bar Association, the real giant) is happy with the new form.  It is not surprising NRMLA wants two (one for reverse mortgages) but will the NRMLA members which are little more than minor profit centers of their ABA member banks have the necessary fortitude to risk their situation to support this proposal (or any similar proposals)?
     
    As Yoda would say:  “Me thinks not.”  How strange it would be to see, for example, Wells support the NRMLA position when its “much bigger sister” divisional operation is supporting the ABA position.  So how heart felt or realistic is the NRMLA position without the support of these its biggest financial supporters other than some type of marginal morale support? 

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