Upon the announcement by the National Reverse Mortgage Lenders Association that the industry association would spearhead an effort toward implementing a financial assessment for HECM borrowers, many lenders are expressing their support of the decision.
The assessment, NRMLA has said, is a step in the right direction in advance of a pending financial assessment from the Department of Housing and Urban Development that is in the works, but could take several more months to develop.
While the response across the industry still seems to be mixed, several large lenders say they are on board including Genworth Financial Home Equity Access, MetLife Home Loans, One Reverse and Generation Mortgage, among others.
Genworth is participating in the financial assessment best practices industry group, led by NRMLA, and has stated its strong support of the process.
“We believe that it is important for reverse mortgage lenders to work together through our trade association and develop best practices around financial assessment,” said GFHEA President Pete Engelken in an email to RMD. “This proactive and thoughtful approach will help ensure that customers understand their reverse mortgage loan obligations such as keeping their property taxes and homeowner’s insurance current.”
Similarly, MetLife, now poised to become the largest lender in the industry, has stated its approval.
“We have been part of the NRMLA discussions, and plan to continue participating in the discussions as they move forward, believing it to be in the best interests of all parties involved,” a MetLife spokesman told RMD in an email.
The assessment, which NRMLA said will be developed in weeks, not months, has its roots in a proposal NRMLA made to the Federal Housing Administration in July.
Top-10 lender One Reverse has expressed its support, not only of NRMLA, but of the industry and its implementation of such an assessment in general.
“It’s something that the industry realizes they need,” says Gregg Smith, president and chief operating officer of One Reverse. “The industry has acted responsibly multiple times and this is another example of that.”
Smith says that while the industry movement toward an assessment in advance of HUD’s guidance is a good thing, there will be some necessary changes in order to conduct it. But, he says, it isn’t a question of if, it’s a question of when.
“We have to ensure that this program is sustainable and is there for seniors to use,” he said.
Others are seeing it as a necessary investment, as well.
“I think the industry has an opportunity here to implement some change, to be proactive, responsible and make a very significant impact on the tax and insurance problem before HUD has to release any complicated regulations,” says Jeff Lewis, Generation Mortgage Chairman. “I think ideally what we’d see at this point is some clarity on what it is we are permitted to do today.”
While the large lenders have expressed buy-in, some of the smaller reverse mortgage players remain skeptical as to what the assessment will look like and how it will impact volume.
“The whole point of this is to help seniors,” says Alex Farber, senior vice president of Residential Home Funding Corp. “The problem lies in the fact that when you do this financial assessment, combined with the lending limits, you’re going to be limiting the number of people you can help.”
HUD has announced its progress on the development of a HECM financial assessment, but has yet to release any details. Initially, HUD officials said the assessment would be ready by mid-2011, but the department’s latest comment on the time frame indicates it could come toward the end of the year.
The NRMLA initiative is to be out in front of the official HUD guidance, a move which many support.
Even those who have mixed feelings about the assessment acknowledge its goal is good for the industry and even better for public perception of HECM products.
“We’re still going to have foreclosures, it’s inevitable. But there will be less,” says Farber. “I think [the financial assessment] is going to negate/counterbalance the negative publicity of these foreclosures.”
Combating negative publicity may be a mere bonus from the assessment, however.
“If we prevent tax and insurance defaults, it’s a return on our investment,” says Lewis.
Written by Elizabeth Ecker