Reverse Mortgage Study To Help Shape Financial Assessment, Program Change

While the results of a forthcoming Ohio State University reverse mortgage study are still many months away, the process has begun toward identifying and surveying reverse mortgage borrowers from 2006 to 2011. 

The results will be well timed to help inform and lead future changes to the Federal Housing Administration’s reverse mortgage program, including a borrower financial assessment, HUD says. 

The study, made possible by grant funding and with the help of reverse mortgage counseling data from CredAbility as well as borrower information from the Department of Housing and Urban Development, will include a survey of borrowers, presenting the most recent data in recent memory with regard to their preferences and loan outcomes. 

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Results of the study will be well timed to help inform and shape forthcoming program changes expected from FHA. 

“[The study provides a] more careful research perspective,” says Stephanie Moulton, Ohio State’s lead researcher on the project. “When we lack data we make political decisions to try to reduce the negative perceptions. If we have more research, it may lead to perhaps less drastic decisions.”

The study is being funded by a research grant of more than $450,000 awarded to The Ohio State University by the MacArthur Foundation. HUD and counseling intermediary CredAbility are partners on the project, with CredAbility providing counseling data and access to counseling clients and HUD providing department data on HECM loans and borrowers. 

The aim of the research is to study the effectiveness of the reverse mortgage as a tool to promote aging in place. And while the study is expected to span several years, some preliminary data is expected to become available in November; presenting an opportunity for the findings to help inform reverse mortgage policy decisions to be made later this year. 

“In November, hopefully we will be able to release a paper to provide analysis speaking to financial assessment policy questions,” Moulton says. “…to at least inform some of those decisions.”

In a brief published in March, HUD stressed the benefit of participating in such a study through the sharing of data to inform some of the policy decisions sought by FHA in order to make the program more sustainable and shore up the agency’s insurance fund. Among those changes is an anticipated financial assessment that will apply to all people seeking reverse mortgages. 

“There are definite benefits for FHA to participate in the creation of this combined data set,” the brief states. “FHA’s Office of Single Family Program Development has been engaged in the development of financial assessment underwriting criteria for HECM loans. The new dataset will provide the Department with HECM borrower data that will help inform those policy discussions. This dataset will also help to shed light on potential changes that should be incorporated into reverse mortgage counseling policies and protocols.”

FHA has asked Congress for the authority to implement those potential changes. 

Written by Elizabeth Ecker

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  • Applying the Aging in Place dogma to HECMs is an artful but irresponsible corruption of the purpose of the HECM program. In the law is a clear statement of the Congressional purpose of HECMs as follows — 12 U.S.C. Section 1715z-20(a):

    “The purpose of this section is to authorize the Secretary to carry out a program of mortgage insurance designed— (1) to meet the special needs of elderly homeowners by reducing the effect of the economic hardship caused by the increasing costs of meeting health, housing, and subsistence needs at a time of reduced income, through the insurance of home equity conversion mortgages to permit the conversion of a portion of accumulated home equity into liquid assets; and (2) to encourage and increase the involvement of mortgagees and participants in the mortgage markets in the making and servicing of home equity conversion mortgages for elderly homeowners.”

    The purpose of the program is to provide liquidity to meet the special needs of elderly homeowners and to encourage and increase the involvement of mortgagees and participants in making and servicing HECMs. Where is there anything in the law which matches the Aging in Place dogma? To reach that conclusion almost takes the kind of imagination that Grace Slick describes when she belts out: “Go ask Alice….”

    HECMs can help meet objective but as Jeff Goldblum blurts out in Jurassic Park: “Yeah but your scientists were so preoccupied with whether or not they could, they didn’t stop to think if they should.” Sure the law provides an inconvenient blast of reality but the co-opting of the HECM program by the Aging in Place proselytizers is at the root of why the HECM portion of the MMI Fund is in so much trouble. Rather than being concerned about the cash flow of the senior following HECM funding, they object to financial assessment. To them the ultimate goal of a HECM is to help the senior keep the home and, yeah, if it provides liquidity well that is an unnecessary but added benefit.

    Congress has never stated in the body of any legislation that the purpose of the HECM program was so that seniors could age in place. By creating the HECM for Purchase Congress clarified that it does not care if a HECM helps a senior age in place or not. Again Congress is providing liquidity. A HECM for Purchase provides money to Age in a NEW place.

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