Now that MetLife has announced underwriting changes to reflect the Federal Housing Administration’s confirmation that lenders are allowed to perform a financial assessment of reverse mortgage borrowers to prevent defaults, the question remains: Will other lenders follow?
Most other top-10 lenders say yes, there is some form of change in the works. Exactly how the changes will play out, however, remains to be seen.
Generation Mortgage plans to implement the new guidance “more or less now,” Chairman and CEO Jeff Lewis told RMD in an email prior to the MetLife announcement. Generation, which operates wholesale and correspondent channels, says it will direct its broker partners on the underwriting with the company’s specifications.
“We underwrite brokered loans so it is our decision how to underwrite them,” Lewis said. “When we purchase closed loans, they are underwritten by the seller. We will need to insure that those are underwritten consistent with our policies.”
The National Reverse Mortgage Lenders Assoication released suggested guidelines during its annual conference in Boston last month, giving some lenders an advised framework from which to establish their own standards.
“We’ve been discussing procedures with our industry partners so we can have a common approach,” Bill Trask, Executive Vice President and General Counsel for Security One Lending, told RMD in an email. “In part, we were waiting for NRMLA to issue its guidance. We’ll give our brokers as much information as we can so they have accurate expectations of how we will underwrite.”
Trask says that even though Security One will have underwriting guidelines, there may be instances of case-to-case evaluation of the borrowers’ capacity and willingness to keep their taxes and insurance current.
During the NRMLA conference in Boston last month, representatives from the Department of Housing and Urban Development said it will release its own guidance in the future. The agency is required to go through the rule making process, which HUD officials said will not be short.
Lenders, too, may take weeks or months to update their processes and release their own guidance.
“We are currently developing our limited underwriting policies and procedures, evaluating consumer education and marketing materials, designing systems changes, and developing internal and external training programs,” said Pete Engelken, president of Genworth Financial Home Equity Access, in an email to RMD. “We plan to implement our new underwriting policies as soon as we are operationally ready.”*
The immediate impact of different lenders having different timetables and approaches to the new guidance is unknown, but brokers say it will certainly impact their business.
One broker told RMD the discrepancies would have a definite bearing on the market for brokered loans, and could possibly lead to an advantage for third-party originators in the business.
*Correction: A previous version of this article stated in error that GFHEA’s underwriting guidelines were forthcoming in January. In fact, GFHEA has not announced a date for implementation of its new policies. RMD regrets the error.
Written by Elizabeth Ecker