AARP: Reverse Mortgage Changes Without Public Input Will Be Short-Sighted

While the mortgage industry and Federal Housing Administration have responded favorably to the recent granting of authority to the FHA to make reverse mortgage program changes, AARP is expressing disappointment over the process by which change will take place. 

The advocacy organization spoke in favor of the Department of Housing and Urban Development going through the rule making process to implement Home Equity Conversion Mortgage program change during a congressional hearing earlier this year. 

At the time, AARP’s Senior Strategic Policy Advisor Lori Trawinski expressed concerns about bypassing the rule making process.

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“While we support the idea of tax and insurance escrows or set-asides, the public should have the opportunity to comment on the specifics of such program changes during the normal rule making process to ensure that changes contain adequate consumer protections and are reasonable regarding the amounts to be escrowed or set aside,” Trawinski said in testimony before members of Congress.

AARP this week responded to the changes in a statement to RMD. 

“We are deeply disappointed that HUD can now circumvent due process in an attempt to solve problems in the HECM program without the benefit of public comment,” said Cristina Martin-Firvida, Director Financial Security and Consumer Affairs, AARP State and National Group. 

AARP stressed the need for comments from those who have experienced problems with reverse mortgages as an integral component of developing program fixes. 

“Hearing from those affected by these problems and experts on reverse mortgages is an indispensable step in addressing the challenges that have resulted from dramatic market changes over the past decade,” Martin-Firvida said. “The HECM program needs reforms to address these challenges, but failure to allow for comment is short sighted and will not provide the information needed to solve the HECM program’s long term  or even short term problems.”

Written by Elizabeth Ecker

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  • Except for perhaps the 60% rule of the initial principal limit as presented on the new changes which will be implemented on October 1, 2013, what in the new changes HUD addresses need the additional powers granted under the new law? HUD has lowered principal factors before using only a Mortgagee Letter and both the Standard and Saver were created by Mortgagee Letter.

    (The opinions expressed may not necessarily be those of RMS or its affiliates.)

  • With the consolidation of the Standard and Saver with the automatic 10 percent across the board principal limit reduction coupled with rising interest rates that are going to knock off an additional 20-30 percent, consumers and their advocates are not going to view favorably HUD’s new ideas to restrict draws of funds and tack on additional costs after the consumer has paid all the closing costs upfront for a smaller and smaller amount of net available proceeds. I even suspect there could be some TILA/RESPA violations lurking in the new rules in addition to push back from Consumer Advocates.
    It should get interesingt to say the least.
    Decisions made in a vacuum are never a good idea.

  • FHA needs to focus on how the program affects the MIP fund to manage risk exposures, the public should not be part of that. I’m sure that NRMLA is making the RM industry heard with regard to the proposed changes.

  • I agree whole heartedly with AARP. By passing the rules making process was wrong and not taking comments from the public was a big mistake.

    I am one who has been dead set against the set aside fee for T&I. An escrow account and seniors making monthly payments into an escrow account makes sense.
    However, I will bet on the set aside fee for the way it will go. The senior has been getting less and less, this will compound that problem.

    “The three primary changes that FHA would like to quickly implement on the program is, the financial assessment of borrowers.

    I am not in favor of that as well. We have always placed the risk on the property. I know, FHA, HUD and others blame a great share of the problems on the home value risk factor.

    The reverse mortgage has always been a program for seniors to be able to tap into thier equity with out the credit qualification worries, that may certainly change now with the new proposed changes.

    The second major change they want to focus on is the T&I issue, which I covered in the first part of my comment.

    The third issue is principle limit utilization restrictions. Now that one covers a lot of territory, wow, sure opens the door to a lot of draw backs to our seniors!

    Yes, I agree with AARP. By the way, the three items I mentioned above are no where near the amount of change I am sure we will see in the mortgagee letter.

    John A. Smaldone

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