FHA Housing Chief to Industry: HECMs Are “Critically Important”

The Home Equity Conversion Mortgage Program is critically important and requires ongoing attention, the acting Federal Housing Administration commissioner told reverse mortgage lenders during a presentation on Tuesday. Stressing the need to prevent tax and insurance default and regain housing counseling funding, Acting Commissioner Carol Galante presented a very supportive outlook for the HECM program.

“It’s still a very robust program for [the Department of Housing and Urban Development],” Galante told attendees of the National Reverse Mortgage Lenders Association convention in Boston this week, stressing the need for attention to the product. “Because it started as a sleepy little pilot program, frankly, it hasn’t had a lot of attention paid to it inside the HUD building.”

Noting the importance of sustaining HECMs during uncharted economic times relative to the program’s 20-year existence, Hill pointed to two critical points in the effort toward moving the program forward.

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The first: a financial assessment of borrowers.

“We don’t yet have the magic solution for exactly how we think the borrower should be assessed for capability and willingness, but we think it’s critically important to work with you to figure out all the steps to that,” Galante said. HUD is entering into a rule-making process on the topic, which Galante said will take time, but is essential to move along as quickly as possible. She noted an October 5 letter she sent through a HECM Program Update, which stated lenders are not prohibited from doing a financial assessment.

“It is an important thing to be doing in this environment,” she said, “and I know you are thinking of ways to do this.”

The second crucial topic is that of housing counseling funding, which Galante noted was zeroed out in the budget for the coming year.

“Housing counseling agencies have been out there running on fumes and are desperate to have some counseling dollars restored,” she said. “I have been up to the Hill in conversations with congressmen on this topic more than anything else in the three months I have been in this post.”

The FHA is looking at the program to ensure it remains sustainable from a credit subsidy standpoint, Galante said, underlining that in order to continue, it must remain neutral.

“This program is very important to HUD,” she said. “We think it’s very important for seniors as a tool and we are trying to improve it, to make it the best it can be, and stabilize it so we can continue to offer this very vital product.”

Written by Elizabeth Ecker

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  • I don’t like to hear her comment about the lack of attention paid to the product within HUDs walls.  I have run into a couple HUD folks from time to time during housing events in the DC area and always commend them on endorsing this product and EVERYTIME I do I get the blank stare or their admitting they aren’t on “that side”.  That stare has just been reenforced by her comments.  These folks are HUD housing representatives, doing public relations in public of all places.  One could assume that the chance meeting with a senior or family member asking the HUD rep about RM could disway them from thinking it to be a viable option.  OR…maybe I’m reading too much into her comment.

    I do appreciate her comments by the way, not slamming her, we need to hear they are talking about the product in some forum.

  • Ms. Galante is right.  In the last few decades, the HECM program has been delegated to the few.  Far too few understand even at HUD.
     
    It is hard to say the program is self-sustaining when we are going to Congress to ask for funding for counseling.  Somehow the two look very suspicious when they are put together as an argument as to why we need counseling funding.  I have always had to stop myself from laughing out loud when these two divergent concepts are presented in the same session at NRMLA.  If HECM pre-loan counseling is not part of the HECM program, what is it?  It is kind of like saying my wife is part of my family but my children are not when the listeners know everyone involved.
     
    Moving on, the disappointing part of her speech was the ignoring of the current issues with the counseling protocol and counseling in general.  The Commissioner like others seems to have swallowed the increase in the certified counselee dropout rate.  Counseling needs to go back under the microscope and meaningful changes need to be made.  The FIT report must go and BCU should be handled by originators with counselors going over the results with counselees.
     
    Counseling and originators should be working in a coordinated way.  Counseling is demanding all or nothing and lenders want an application before counseling.  Yet some counselors are upset with the counseling demand because they claim counselees have no idea about the product, the approximate value of their home, and on and on.
     
    Why not have counselees first meet with an originator to provide a proposal (not formal application) and gather financial assessment data and going through BCU if required?  Then following the assessment get the educational portion of counseling done.  Following education, the counselee should meet with an originator to complete an application.  Then the applicant should return to counseling for financial risk assessment, review of the key parts of the application, review their plan to utilize proceeds, and go over the results of BCU.  This seems to give the counselees the greatest opportunity to learn about the program and see if they qualify on a preliminary basis including any expected financial assessment underwrite.  It also means all financial information can potentially be gathered at one sitting, not just guessed at in the financial risk assessment segment of counseling.  Finally, it allows for greater consumer protection by counselor review of the actual application the lender is proposing along with the opportunity for the counselor to make sure that counselees have a sound plan for use of the proceeds.

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