AARP Outlines Six Reverse Mortgage Program Fixes

Upon testifying before a Senate subcommittee in June, AARP Public Policy Institute Senior Strategic Policy Advisor Lori Trawinski noted several considerations and concerns regarding the Federal Housing Administration’s reverse mortgage program. 

In a blog post today, Trawinski outlined six potential changes to the program that would improve it, from regular evaluation of the program to support for modifications proposed by the Department of Housing and Urban Development that would make the program safer both for borrowers as well as FHA’s insurance fund.

The recommendations include: implementing change to strengthen the program such as financial assessments, tax and insurance set asides and limitation of upfront draws; requiring HUD to evaluate the program every two years; implementing a suitability standard; requiring lenders to present all loan products; conducting a study of HECM for purchase fraud; and urging the CFPB to conduct a study on the appropriate use of reverse mortgages. 


“Care must be taken to ensure that the HECM program remains true to its original mission—to provide older homeowners with access to home equity through FHA-insured reverse mortgages so they can age in place,” Trawinski writes. 

View the detailed list of recommendations.

Written by Elizabeth Ecker

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  • Ms. Trawinski ends with: “Care must be taken to ensure that the HECM program remains true to its original mission—to provide older homeowners with access to home equity through FHA-insured reverse mortgages so they can age in place.” While many may agree with that statement, it is absolutely wrong.

    In a rare move, Congress stated precisely in the law what the purpose of the HECM program is. The law states:

    “(a) Purpose

    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.” [12 USC 1715z-20(a)].

    So where is aging in place? This convoluted interpretation of the purpose clause is for the sole purpose of twisting the actual meaning of the law. While aging in place is a direct benefit for most seniors who participate in the HECM program is not the purpose of the law.

  • It is interesting that Trawinski makes one of her six points, fraud with HECMs for Purchase. With so few active HECMs for Purchase, one wonders why she lists it. Is there really that much fraud connected to these HECMs? Could this be the next source of a new wave of bad publicity for the industry? Let’s hope not.

  • That`s better than the senator that asked questions like he never heard of a Reverse Mortgage.Do you think Tom Hanks comes to the set the 1st day without researching the script..

  • Vague, nebulous, indistinct, ambiguous, come on, there must be dozens more synonyms for Fairness and Suitability. One thing is for sure, words like this don’t belong in the decision making process or the rules governing decision making to determine eligibility for consumer products, especially mortgage instruments like hecms.

    Mathematical formulae, ratios and documented historical or verifiable data are appropriate tools for the determination of eligibility because they do not rely on the personal philosophies, attitudes, or moods of the underwriter, investor, or regulator. They cannot be selectively and subjectively interpreted or enforced. In other words they are not subject to whim nor fancy nor personal feelings.

    I hope Congress, HUD, the regulatory bureaucracy and our industry, including AARP’s Ms Trawinsky can refrain from adopting such ambiguous terminology in evaluation, determination, enforcement or any other area of our business.

    It’s just not FAIR or SUITABLE! lol

  • I agree with the first four. I am not sure about the HECM for purchase fraud issue unless she is privy to something the rest of us are not.
    The last thing anyone needs is another study by the out of control unregulated CFPB. Don’t they waste enough of taxpayer money with all their studies?

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