NCOA to Congress: Don’t Let HUD Overdo Reverse Mortgage Financial Assessment

While keeping up with the obligations of a reverse mortgage is paramount, a borrower financial assessment should not be so restrictive that it rules out the people who need the loan most, said a National Council on Aging representative before members of Congress during a May hearing.

“The HECM program is an important financing option for lower- to middle-income older homeowners,” said Barb Stucki, of the National Council on Aging. “It is important that borrowers have the ability to meet the obligations of HECM loans, including paying ongoing property taxes and homeowner’s insurance,” she said. “However, we are concerned that that these financial assessments may become overly restrictive.”

A financial assessment for borrowers was attempted in late 2011 by MetLife Bank, but was later suspended by the company. Department of Housing and Urban Development officials have stated publicly that they are in the development process for an industry assessment, expected later this year.

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The industry shared NCOA’s concerns when MetLife implemented its assessment, which quickly led to a shift in broker business away from the stringent guidelines. Many said it was too restrictive and limited borrowers who needed the loans most.

Stucki reiterated the importance of not making the rule too restrictive in her testimony before the House Financial Services Subcommittee.

“Ensure that HUD regulations, such as the financial assessments lenders may conduct at origination, are not allowed to become overly restrictive to ensure that the HECM program remains a viable option for “cash poor” seniors,” she said. “Reverse mortgages can bring new risks to people who may have limited experience dealing with large sums of money. However, seniors with modest incomes who do not qualify for conventional home loans may have few alternatives besides a HECM to tap home equity.”

Written by Elizabeth Ecker

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  • Then let NCOA insure these loans against defaults.  It is easy for NCOA to voice this opinion since they have no skin in the game and only take fees from either the federal government or counselees.

    Let HUD work out the details with the lenders through NRMLA.

    •  I would like to see what NCOA’s ideas are for this.  Considering that the whole purpose is to prevent a default for failing to pay taxes and/or insurance and/or maintaining the property, you would think that they would welcome a financial assessment that works.  Watching a senior lose their home over something like this is going to make for a lot of bad press when it comes to HECMs.  I would wonder if the ones in the most need are the very ones that are most likely to default later.

      Frank J. Kautz, II
      Staff Attorney

      Community Service Network, Inc.
      52 Broadway
      Stoneham, MA 02180
      (781) 438-1977
      (781) 438-6037 fax
      FrankKautz@csninc.org –work
      Frank@Kautzlaw.com –private

      • Mr. Kautz,

        If NCOA had some relevant ideas as to what to do, they have the ear of HUD and lenders.  Instead they are invoking Congress to get involved even before HUD has taken any position.  If Congress gets overly involved, financial assessment could take years.

        The real question is not what NCOA has in mind but rather why is it invoking the involvement of Congress so early in the process.  NCOA can express its ideas in the press, through AARP, with HUD and NRMLA, and many other avenues.  Why provoke Congress into overseeing this issue now?

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