HUD Cuts HECM Brokers From Approved Lender List, Raising Concerns

In the past, borrowers could search the Department of Housing and Urban Development’s Lender List for approved Home Equity Conversion Mortgage (HECM) lenders and brokers. But since the Federal Housing Administration made the shift to include non-FHA-approved third party originators to originate HECM loans, the list has cut all non-FHA approved brokers, even though they are approved through their lenders.

“It creates a disadvantage, especially for brokers that are dealing with customers who come from websites or lead purchases, when those customers are shopping around heavily and/or possibly concerned about a broker’s legitimacy,” said Lance Jackson, of Castle Reverse Mortgage. Jackson says that there is little impact on his business, which is largely referral driven. But a concern arises when it comes to HECM counselors who are asked by borrowers for lender recommendations.

Counselors are instructed to point borrowers to the HUD Lender List if the borrower asks for a recommendation. While the vast majority of borrowers have already spoken with a lender once they come to the counseling session, still a fair percentage end up seeking guidance and going to the list for more information.

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“If a borrower asks, ‘How do i find a lender?’ we do point them to that lender list,” says Christena Schafale, Director of Information Services for Resources for Seniors. Schafale estimates that while 90% of her clients have already made contact with a lender, still 20-30% will still ask for guidance in finding additional lenders to talk with. In that case, the Lender List is the only HUD-approved resource.

“HUD has told us that’s the only thing we can do,” she says.

For other counselors, while they may not point borrowers to the list directly, HUD is the sole resource for approved lenders.

“My biggest concern is the counseler issue,” says Beth Paterson, executive vice president of Reverse Mortgages SIDAC. “If they only recomemend the HUD list, they are leaving out brokers,” she says.

Paterson noticed the change in the national list after finding her company had been removed from a local resource listing reverse mortgage originators, due to the HUD update, which the Department says would be difficult to change.

“Our responsibility is to FHA Approved entities,” a HUD spokesman told RMD. “It would be very difficult for us to list ‘sponsored originators’ since those individuals are managed by and have a relationship with the FHA-approved lender, not with FHA.”

Not listing those sponsored originators is problematic from the viewpoint of those originators, who are just as qualified and approved as their lenders, but don’t make the cut when it comes to the list.

“It’s a disadvantage to us because we no longer have to go though the FHA approval, but we are lender-approved,” Paterson says. “My frustration is that it’s a disadvantage if counselors do reference the HUD list, or if a borrower is looking to verify that we are approved. Somehow, we as brokers need to be able to be identified as being legitimate.”

Establishing legitimacy is the biggest concern of brokers who spoke with RMD.

“One could conclude if you’re not on the list, then you’re suspect,” says George Downey, of Harbor Mortgage Solutions.

That could create problems from a competitive standpoint, brokers say.

“The problem with a list of HECM lenders from the HUD website is that it excludes all of the broker population that originate HECMs,” says Lynn Wertzler, president of Greenleaf Financial. “The implication is also that if a broker is not listed on the HUD website, then the broker is not a legitimate firm to do business with. To the extent the HUD list is referenced by people looking for a HECM lender, this will guarantee the business will go to the Full Eagle with the brokers having no chance to win the business.”

One potential solution, Paterson noted, could be distinguishing HECM originators through the National Mortgage Licensing System, which tracks all licensed brokers and lenders. Currently, the database does not identify which brokers originate HECMs.

“There may not be an overnight fix,” Paterson says, “but there has to be a solution.”

Written by Elizabeth Ecker

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  • The system should stand as is.  Lender approval means little since no one has access to the approved list other than the lender itself.
     
    Recommending anyone who is not on the HUD approved list is by definition steering.  Counseling agencies are not privy to approved lender lists; by the time the recommendation is made the broker might NOT be approved by any HECM full eagle.  Counseling agencies which make such recommendations should be severely reprimanded by HUD; that practice is a clear violation of the anti-steering rule. 
     
    There have to be some advantages to the risks of being a full eagle.  This out of necessity is just one.
     
    Brokers have every right to express their concern but they should not expect much sympathy.  They need to find their own alternative.  After all isn’t that what entrepreneurs do?

    • A counselor recently took it upon herself to tell my borrower that neither my company nor I was licensed or approved broker because she could not find us on FHA list.  Caused me problems.  Apparently counselors have not been advised to check NMLS rather than FHA list.

      • pass2you,

        You want recognition as being able to provide FHA insured loans.  Who will do that for you?

        NMLS does not track what companies or individuals are qualified to do FHA insured lending.  While I like the idea of indicating whether a lender has full eagle status, NMLS should not track anything more than what it does right now and again perhaps FHA full eagle status, period.

        Lender approval is like the sand under the ocean near the shore.  It shifts all of the time.  Look at what Genworth did today.  Yesterday, their approved lenders could do HECMs on manufactured homes; today they cannot despite what the Genworth retail unit can do.  How would NMLS track those differences?

        Perhaps those who do not have full eagle status should appeal to HUD to add a lender approved list to their website.  In that case the website should warn users that the information is not HUD maintained and users of the list do so at their own potential detriment.  Counselors should be required to provide that caveat if they make reference to the list.

        Quite frankly, there should be no way to verify FHA approval, since it does NOT exist for entities which do not have full eagle status.

  • Thank you for bringing up this
    issue, Beth. I agree that the proper source for counselors should be NMLS, not the FHA list. NMLS needs to find a simple way to make it
    happen equitably. Lenders and brokers
    offering HECMs should be presented equally so that seniors and their advisers know
    the full range of options available. It is too easy for seniors to conclude that
    the only legitimate HECM sources are those organizations published on HUD’s
    list. Note, also, that brokers fully
    licensed in multiple states are not listed at all in those other states under
    the HUD formula. If NMLS becomes the
    standard appropriate reference source, we should propose a change to this unintended
    consequence, as well.   

  • Clearly, this puts brokers at a disadvantage regarding potential customers who are searching the list first to find an approved lender.

    At the least, HUD should include an introductory statement to the list, that some (or many) of the approved lenders additionally have approved brokers who may also originate HECM’s through the approved lender.

    • ATX43,

      If that was true in the HECM Advisor program era, it should be true to day.  But it was not and why should HUD add such a caveat?

      You have the way to get around this issue and that is simply to get full eagle status.

      • Lance,

        Why do you STRONGLY disagree?  HUD is overseeing TPOs the same way it oversaw HECM Advisors.  HUD should have cut the list down on 1/1, not 10/20. 

        If there were no caveat for HECM Advisors why should there be one now?  Neither full eagles nor mini-eagles pleaded with HUD to add a caveat for HECM advisors when you worked at Wells and they were 25% of the business at Wells.

        What is needed is the return mini-eagle status, not recognition of TPOs. 

        Are you arguing TPOs cannot become full eagles?  Maybe you are arguing both.  Your response is unclear other than you disagreeing with something or everything.  

  • The Cynic is right. The system needs to stand by itself! This move will steer seniors away from the broker and will damage the credibility of some VERY good companies out their.

    I wonder at times if their is a movement to eliminate the broker from the scene entirely

    John A. Smaldone.

  • There should be a source other than the HUD Approved Lenders List, since those companies are not the only sources.  Providing only those sources is a disservice to borrowers since a broker might actually be able to provide a better solution (yes, it happens and prior to Dodd-Frank we did it all the time!).  What list to provide and how to make it available will take some effort though.

      • Many brokers were previously FHA approved.  The only difference now is that FHA doesn’t want to monitor brokers, not that brokers are suddenly sub-par.

      • reverser,

        I respectfully disagree.  Are you saying HECM Advisors were subpar?

        As to brokers, things are much different now.  There is no reporting to HUD.  Brokers can shop for the easiest lender to qualify with.

        Please describe how those who do not have full eagle status today are any different than pre-HERA HECM Advisors.  It is my strong contention, they are not except things are much easier for brokers today than for HECM Advisors back then.  For example, the restrictive HECM Advisor compensation rule does not exist.

      • With all due respect, there is a huge difference between reverse mortgage brokers (some of which are the most knowledgable in the entire business) and HECM Advisors of the past (a traditional mortgage broker that needs a place to refer out the occassional RM).  Frankly, I’m surprised you’d compare the two.  Based on your comments, you obviously work for a full eagle lender (I’m getting more clues as to your actual identity Zorro!).

      • Lance,

        Today all former HECM Advisors and mini-eagles who get lender approval are TPOs.  How in the eyes of HUD is there any difference?  I am not comparing the two, I am just recognizing the fact HUD has permanently fused them together into the new category of TPO.  In the new HUD status, please describe how I can compare them?  They are fused spine-to-spine.

        Yes, I have worked at four different lenders.  Only one is a full eagle; the other three were mini eagles.  I once respected mini eagle status.  I just cannot find mini eagle status today.  Instead any HECM lender which is not full eagle is a TPO.  TPOs have no status with HUD and are no different in that regard than HECM advisors.

        I hear this tiring cry from brokers of how they are so different than the HECM advisors of the past because of experience, etc.  Yet I met employees of HECM advisors who had a lot of experience and had even trained by Wells Fargo, a full eagle which you used to work for.

        On another matter, I do not call you some silly name, please stop the insulting Zorro business.  The_Critic seems to love it.  I think she/he likes the attention from a nice guy like you (and most people in the industry believe you are all of that.  You have an excellent reputation.)  Stop insulting me with the silly name!!  I do not find it cute or funny.  Have a little respect please.

  • “The_Cynic”…Why are you afraid of fair competition?  Having counselors provide a list of FHA lenders only as you say is steering.  All properly licensed and lender approved HECM originators in the area of a prospect should be on a list the counselors provide is the fair approach.  Anything short of that IS steering.  If the tables were reversed I think you might have a different attitude.

    Instead of all of us fighting amongst ourselves, we should be combating the politicians and media that demagogue our whole industry and not be dong this to ourselves.

    • Steve,

      Were you advocating that HECM Advisors should be listed by HUD in the past?  How are brokers without Full Eagle status of today any different than HECM Advisors of the past?  I do not remember any outcry by brokers that they should be on any FHA list.

      This is not a battle of equals.  Like HECM Advisors, you have no direct status with FHA, period.  Brokers need to figure out what to do.   Do not expect anything more than lipservice from those of us who have to maintain HUD approved status.

      • I disagree with your characterization RM brokers by referencing the HECM Advisor program.  Please refer to my comment above.

      • Lance,

        I know you want it to be different but please describe how a TPO is any different from a HECM Advisor?  There were a lot of brokers who were HECM Advisors.  Experience alone is not how one becomes a full eagle or became a mini-eagle in the past.  It is HUD which has decided that HECM advisors and mini-eagles are all the same — TPOs.

        It seems long-time HECM brokers hate losing their mini-eagle status but that is their battle with HUD.  Every entity that is not a full eagle is a TPO as long as they are approved by a bank.  How does that differ from being a HECM Advisor?

  • It is inappropriate for the Federal Government to effectively endorse lenders, while ignoring brokers.  Either all or none should be endorsed.  The NMLS list is the only real fair way to list both brokers and lenders on a level playing field – but only if an additional licensing requirement is put in place for HECM lenders/brokers.  
    By now, it should be clear to brokers that nobody (not government, not NRMLA) is looking out for their interests.  It is time Reverse Mortgage Brokers organized their own trade association to fight for their rights in this industry.

    • reverser,

      If brokers had to meet FHA standards, that would be fine.  Today brokers are the equivalent of HECM advisors of yesteryear and they were never listed anywhere.

      • Cynic – Every day I hear about lenders’ employees who are (intentionally or unintentionally) spouting misinformation and generally leading borrowers and this industry down the wrong path.  Every day I find myself having to teach lenders’ employees actual facts about reverse mortgages as I try to process my loans.  I have been dedicated exclusively to the reverse industry for ten years.  My opinion and expertise has been consulted by lenders implementing new procedures, policies, or programs.  Yet, you are saying that I am no better than someone holding out my hand looking for a finder’s fee?  I shouldn’t be penalized just because I prefer the flexibility of working with the lender that best suits my borrower’s needs and the personal satisfaction of operating my own business.  These qualities do not take away from my ability to provide a quality service and properly educate my borrowers.  I believe I am far better able to serve the senior customer base than the majority of lender-employed originators.

      • reverser,

        Are you saying this is true of all TPOs or just some?   Are you saying you have earned Super HECM Broker status?  I am sure HUD will put YOUR company on the Full Eagle list as a result.  For what is it you want to be recognized?  You have done absolutely nothing to obtain a different status than TPO.

        BUT my problem is not with you or other long-term HECM brokers.  You are great for the industry and do good.  It is that HUD has relegated you to TPO status with no way to differentiate yourself from the TPO which started yesterday.

        Your fight is with HUD.  You should be complaining that the mini-eagle status was stripped from you through a very controversial reading of a HERA provision.  You should be arguing to have that status reinstated otherwise you are no different than any other TPO which decided to do HECMs last night over a few drinks.

        Believe me when I say that in a friendly war over a customer, your TPO status will be used against you as it SHOULD BE. 

        BUT again that is HUD’s doing not that of full eagle lenders.

      • Ideally the NRMLA consumer site be the source to find a
        reputable lender but they’re not involved in reporting hecm activity. Maybe
        reversebase.com or RMI could create a consumer section  😀

      • Cliff,

        NRMLA is not HUD.  If you think seniors will accept the recommendation of NRMLA as authorative, then you are a better NRMLA member than I.  Will going to RMI or reversebase.com substitute for HUD approval?  Those sources cannot warrant whether a lender is still approving your employer or not?  Even if it could that buries your position as nohing but another TPO which has no vested interests in the industry.  Competiting originators of full eagle lenders will bury you in such recommendations.  Their employers have full HUD approval, not yours.

        If counselors recommend using the NRMLA site, then that is clearly steering.  Remember not all TPOs are NRMLA members, yet they enjoy the same lender approval as you.

        The technical status of any company which is not a full eagle is TPO.  You have no other rights or status within HUD.  All former mini-eagles who did not become full eagles are now in the same boat as the company which did one HECM in the last 11 months.  Remember your NRMLA membership is not conditioned on HUD or lender approval.  That was true at one time in a galaxy far far away.

        Cliff, what you are doing is providing fodder for full eagle originators to use against TPO originators.  The real answer as to why your employer is NOT a full eagle lender is simple — it could NOT qualify.

  • I believe in this industry. 

    Mini-eagles served this industry well.  I worked at three.  I fully respected that status.  I was always somewhat bothered by the HECM Advisor status. HECM Advisors were never mini-eagles. HECM Advisors were simply lender supervised.

    Mini-eagles had a recognized status within HUD which they earned — THE hard way.  I was always far more cautious with HECM Advisors than mini-eagles.

    Well there is no mini-eagles status today and the hard facts are either an originating HECM entity is a full eagle or a TPO.  A TPO includes nationally chartered banks, credit unions, and brokers.  Time in the industry should not and does not matter.  TPOs are just that TPOs.  The sooner that is accepted by the industry the better for all of us.  Get over it, it is what it is.  HUD in its wisdom made it that way.  I wish it were different but that is the way things ARE.

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