Pullback of Regulations Opens the Door for Increased Reverse Mortgage Volume

It’s not the HECM Advisor Program, but the Department of Housing and Urban Development’s decision to allow brokers not approved by the Federal Housing Administration to originate reverse mortgage loans could take off as a growth opportunity for the industry as a whole.

Wholesalers say the shift provides significant growth potential and the chance to bring new players into the business. Data from HUD shows the number of non-FHA approved third party originators (TPOs) offering reverse mortgages has grown dramatically in March, and continuing into April.

“Several years ago, under the HECM Advisor program, an FHA-approved lender could take a loan application from a non-FHA approved company,” explains John Lunde, president of Reverse Market Insight. “FHA shut that down a couple of years ago. Now, effectively with their change to allow non-approved brokers, it reopens that door.”

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The HECM Advisor program, shut down in September 2008, allowed non-FHA approved originators refer borrowers to FHA-approved reverse mortgage companies. Under the program, those originators could receive a referral fee for doing so.

With new regulations allowing for non-FHA-approved originators to offer reverse mortgages data from HUD is already beginning to show these originators at work, although it has not yet tracked the individual TPOs.

Some wholesale lenders note they are eager for the opportunity to work with new brokers, even if they have little to no experience in reverse mortgages.

“We believe that non-FHA-approved TPOs present a significant growth opportunity for the reverse mortgage industry and are committed to helping them grow with targeted education, tools, ‘hands-on’ sales and marketing support,” said Pete Engelken, president of Genworth Financial Home Equity Access. “We have developed a new TPO Educational Portal which provides comprehensive product, marketing, loan origination, and operations education to make the transition from forward to reverse mortgages a very easy process.”

With wholesalers doing business not only with experienced reverse mortgage originators but also encouraging business from originators who might have less experience with reverse products, does it present a disadvantage for those who have been in the business for years? MetLife says it continues to assess the standard of all originators, forward or reverse.

“We do require each potential broker to provide a summary of their reverse mortgage business plan so that we can evaluate their commitment to the business,” says Michael Mooney, assistant vice president, reverse mortgage division, MetLife Home Loans. “We focus more on the quality and conduct of our existing brokers, but we do review the production of our brokers regularly.  While we typically do not terminate broker relationships based specifically on volume, there is a correlation between origination quality and volume. Very low producing brokers could be a strain on our customer support functions if they don’t stay up to date on changes in the industry.”

Others have a more open policy when it comes to working with new brokers, reverse mortgage-specific or newer TPOs who may be closing their first reverse mortgage loans.

“It has always been Reverseit’s philosophy,” says Bryan Hendershot, CEO of Urban Financial Group. “We’ll hold anybody’s hand and walk them through the business.”

However, he says, getting into the business requires commitment. “You can’t just say you’re going to do reverses and think it will fall on your lap…it takes a big dollar investment. You have to spend on marketing.”

Still, the wholesalers have responded favorably.

“Even at low volumes, reverse mortgages can be profitable for TPOs because there are relatively low costs of entry by leveraging the expertise, support, and origination platform of a reverse mortgage lender…” says Engelken. “Over time, we believe there is significant potential for TPO volume growth as the senior population grows and product awareness expands.”

MetLife has a similar take, but also stresses the standard of evaluation the company maintains for all of its third party originators.

“With FHA no longer requiring a separate approval, we can focus on educating clients that are committed to responsibly originating HECM loans for their customers, but every third party originator is still subject to our own evaluation,” says Mooney.

The lasting power of non-FHA-approved TPOs remains to be seen, but the potential for growth in the meantime could be substantial.

“It opens the door to thousands of lenders who are not FHA-approved,” says Lunde. “If you look at the number that are [approved] and that aren’t, there’s a much bigger number that aren’t.”

Written by Elizabeth Ecker

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  • Am I the only one that thinks this will potentially create more problems for our industry? A broker that is not FHA licensed and not up to date on all the changes going on almost daily with our program. Doing a loan here or there as they happen come across a senior client?
    Growth sure… but good growth, I would say no.

  • It has been clear for some time that the reverse mortgage industry was going the way of the forward industry and the reverse is just another financing option.  That is good for the industry and good for the senior, with one caveat, reverse mortgage originators need to be required to have special training, testing and probably a special specific license.  While a reverse mortgage is truly just one finance option, it has many specific side effect and complications as well as special communications issues.  If you think that borrowers have been given erroneous information in the past, think of the information they will be receiving now.  And if we, as an industry, think that the counselors will pick up the slack and correct the misinformation, we are only kidding ourselves.  A blind eye is what got us into this financial mess in the first place.
    Sorry NRMLA, it is a good concept but we need more than the voluntary  CRMP.  The industry needs a requirement for everyone that talks to seniors about reverse mortgages.  Counselors have required testing; originators should be at least as professional. Last week, someone in my office talked to a potential borrower that got four different answers from four different lenders when they asked a question.  That is not helpful to our industry or the borrower.
    I am very interested to know what others in the industry think about required training/testing specific to reverse mortgages. And we are not going to change the NMLS testing so it would have to be in addition to, not instead of the NMLS requirements. 

  • Let’s start with uniform licensing requirements for ALL mortgage originators.  In what profession are employees of specified commercial enterprises allowed to compete with others without a similar license?  Are insurance salespeople who work solely for an insurance carrier or at a bank permitted not to have state specific insurance licenses?  Are bank or securities dealer employees permitted to sell stock, commodities, or bonds without appropriate FINRA securities licenses?  Can lawyers practice law because they work for an international law firm without being appropriately licensed somewhere?  All mortgage loan originators should be forced to pass the national NMLS exam plus one state exam.
     
    The CRMP could become a licensing standard for originating reverse mortgages IF it had an education requirement beyond 15 NRMLA convention hours.  It should have at least a first grade satisfactory completion requirement (LOL).  It has the feeling of little more than a costly Cracker Jacks prize for semi knowledgeable industry veterans who need some kind of credential.  This is the side of the credential that makes its holders stand out as kings “with no clothes on.”  It is a shame the CRMP has this flaw; its holders deserve better.  In this regard the shame IS on NRMLA and its Credential Committee.  
      
    How are reverse mortgages so different from other mortgages?  It is when people think they somehow are different that we run across beliefs that the bank owns the property, etc.  Reverse mortgages are a variation of a SISA mortgage with a penalty free pay option and a few unique features generally limited to those over 62 (although one lender at one point had a reverse mortgage available to those over 60).  Yes, HECMs have even more variants but that is typical of most government insured mortgages.
     
    Much of the confusion with HECMs is because of requirements for the loan to qualify for FHA insurance and the mixing of terminology.  For example, “maximum claim amount” is not exactly a common term to use in the mortgage industry in talking about the mortgage itself.  Also where else in the entire mortgage industry is the concept found of a lending limit which has literally nothing to do with any limit related to how large the balance due is or can become but rather its sole use is in defining the maximum value of the home which can be used in determining gross loan proceeds?  The balance due can theoretically grow to be multiple times this very odd “lending limit” and gross initial proceeds are always less than this “lending limit.”  My suggestion is to change HECM language to conform with mortgage industry terminology wherever possible.

  • I have serious concerns for our seniors. The senior is confused enough with a reverse mortgage and with all the changes that have come down the pike.To me, this looks like we will have many non-professionals coming into the industry confusing seniors even more with the lack of product knowledge on the part of LO’s.It used to be that we would pride ourselves as having the knowledge to counsel and deal with a seniors financial future. Am I missing something here? It seems for the past three years, all we have seen are new rules and regulations coming into play to supposedly protect the senior. Many of the rules and regs were to protect seniors from us big bad wolves. Is it not a hypocritical move to bring in this new rule change. Are we not taking away some of the safe guards we supposedly gave the senior by implementing all these new regulations both federal and by the states? It looks like we will be exposing our seniors to people who have little to no experience in reverse mortgages. Many of these people will not have the mind set for dealing with our seniors and surely will not counsel them properly. No, as far as I am concern, this is just another rule made by our great bearcats that don’t know what they are doing. They are only trying trying to justify their positions and in doing so, they will only confuse the the senior and the industry as a whole even further! John A. Smaldone

  • I have serious concerns for our seniors. The senior is confused enough with a reverse mortgage and with all the changes that have come down the pike.To me, this looks like we will have many non-professionals coming into the industry confusing seniors even more with the lack of product knowledge on the part of LO’s.It used to be that we would pride ourselves as having the knowledge to counsel and deal with a seniors financial future. Am I missing something here? It seems for the past three years, all we have seen are new rules and regulations coming into play to supposedly protect the senior. Many of the rules and regs were to protect seniors from us big bad wolves. Is it not a hypocritical move to bring in this new rule change. Are we not taking away some of the safe guards we supposedly gave the senior by implementing all these new regulations both federal and by the states? It looks like we will be exposing our seniors to people who have little to no experience in reverse mortgages. Many of these people will not have the mind set for dealing with our seniors and surely will not counsel them properly. No, as far as I am concern, this is just another rule made by our great bearcats that don’t know what they are doing. They are only trying trying to justify their positions and in doing so, they will only confuse the the senior and the industry as a whole even further! John A. Smaldone

  • It’s not about you, me , or seniors. Ever wonder why all the “New Consumer Protection’ laws always seem to backfire on the consumer? Why would you think this industry is different? Take a look at the New US Constitution…..”We the Corporations of the United States, in order to form a more perfect Corporation…………..

  • Cynic….

    While I understand where you are coming from, I agree with Patty, in that most Reverse Mortgage professionals are exclusive to Reverse Mortgage, and do not have the “froward” experience required to pass the license testing as it stands today.  Also, we are working with a very specific market, that often requires a higher level of assistance in knowing the options.

  • Just wanted to point out that the Critic continually misrepresents the CRMP requirements. The eduactional pre-requisite before someone can sit for the CRMP exam does not necessarily have to be comprised of NRMLA conference sessions. We do design some specific sessions at conferences to be credit-bearing courses, for both CRMP and NMLS, as a convenience to attendees. These are courses that have a specific curriculum, not the general industry trends sessions and must be approved by the NMLS regulators. We also accept credit from courses presented by other providers, after they are reviewed and approved by our Independent Certification Committee. The 15 hours, plus 3 hour ethics symposium, are requirements before sitting for the exam, along with experiential requirements.

    Once the CRMP is earned, designees must also meet continuing education requirements on an annual basis. Once again, these requirements could be met through credit-eligible courses at NRMLA conferences, but also with relevant course from other providers, as well.

    Our program was designed with input from one of the top consulting firms in professional eduation and to meet the requirements to be an accredited professional credential. So,while the Critic may  feel that our program falls short of his (or her? what gender are you Critic?) standards, it meets the standards established by leading professionals in the field of continuing education and certification.

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