FHA: Don’t Expect Reverse Mortgage Hybrid Product Any Time Soon

Among the industry conversation about an alternative to the full-draw fixed rate reverse mortgage product and the adjustable rate alternative, discussion of a hybrid reverse mortgage arose earlier this year among industry participants at the National Reverse Mortgage Lenders Association east coast conference in New York City. 

Despite overwhelming support from NRMLA as well as originators and secondary market participants, the industry should not expect to see a hybrid reverse mortgage any time soon, the Federal Housing Administration’s Deputy Assistant Secretary Charles Coulter told attendee’s of NRMLA’s annual convention in San Antonio last week.

Coulter spoke of changes coming to the reverse mortgage program, but the hybrid product discussed earlier, which would allow for some of the loan proceeds to be taken up front at a fixed rate, with the remainder taken as an adjustable line of credit, is not among them. 


“We’re committed to a strong, stable FHA,” Coulter said. “The Home Equity Conversion Mortgage is a unique product. We want to continue to work with you to make sure we are making changes that are consistent, reasonable, and create a program that has these characteristics. [Regarding] the fixed standard, financial assessment and tax and insurance defaults we will take a constructive and aggressive approach in addressing those areas. A hybrid would be ideal, but putting a product in place would not happen in a short enough time span. It’s not a near-term alternative.”

NRMLA previously brought the idea of a hybrid product to meetings with White House officials, and said at the time it would be better not only for the consumerbut also for FHA’s insurance fund. 

Written by Elizabeth Ecker

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  • This is an important development.  In discussions with an industry leader who was involved with HUD officials during the referenced meeting, there was supposedly a strong reception for the product.  The words which were used to describe the HUD conclusion to that meeting went something like:  “We (HUD) are not the ones stopping you from creating hybrids.”

    It is good that HUD has officially come out and made a less ambiguous declaration so that there is no lack of clarity on the topic.  At least HUD has gone on record calling a hybrid “ideal.”  That was the conclusion of our executive committee when I presented an outline of such a product over five years ago.  Others in the industry have more recently created their own version of what I describe as a hybrid.

    Based on the article above, our industry needs a fixed rate product until HUD permits FLEXIBLE hybrids.  With that understanding, it is time to go back to the disclosure drafting table to come up with better and more transparent wording on the consumer risks of the fixed rate product.

    BUT HUD seems to have an open door to presenting the financial design of a hybrid product.  Knowing approval will not take a short time, it behooves the industry to design and present a well crafted hybrid model to HUD within the next few months.

    It is good to see HUD come out in such strong support despite the time they think will be needed to implement it.

  • Mr. Mastromatto,

    Perhaps it is those very “lenders” who are intensifying the concern of HUD.  Are any of these “lenders” current FHA approved mortgagees?  If so, they should be taken to task by NRMLA and HUD.  There is also a huge difference between having no interest and being incapable of offering some products, such as Savers, at a profit; the latter is to some degree understandable but having NO interest in such products characterizes those lenders as only having a passing interest in actually helping seniors.

    RMD has some reason for writing:  “Despite overwhelming support from NRMLA as well as originators and secondary market participants….”  But it seems you have more relevant information about investors.  Please provide it specifically when it comes to hybrids.

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