The biggest challenge the reverse mortgage industry faces is finding the opportunity in changes the Department of Housing and Urban Development (HUD) is making to its reverse mortgage program.
Speaking at the Texas Mortgage Bankers Association’s Reverse Mortgage event in Austin, Tx., Peter Bell, the president of the National Reverse Mortgage Lenders Association said it’s critical for the industry to adapt. Rather than be used as a tool to help during a criss, HUD’s reverse mortgage is being retooled as a long term financial planning tool and the industry must adjust.
“FHA is trying to encourage borrowers to tap their equity slowly and steadily,” he said.
Starting October 1, borrowers will receive roughly 15% less in proceeds and have restrictions on how they can use the funds for the first year.
During his speech, Bell said that six companies in the industry are working to commit $30 million over the next five years to launch the largest communications campaign ever for the association. While the details are not yet finalized, the concept under discussion focuses on using reverse mortgages as part of a comprehensive plan to help those during retirement.
While the changes made to the Home Equity Conversion Mortgage Program are significant, there is a possibility that after fiscal year 2014, principal limits could be adjusted upwards.
“We will have the opportunity to engage in dialogue with HUD, and maybe have the chance to change things later,” said Bell. “It would not surprise me that if we continue to see improvement in the economy, we could see principal limit factor adjustments in the coming years.”
Written by John Yedinak