HUD: Reverse Mortgage Program Changes On the Right Track

The reverse mortgage industry has seen, quite possibly, the most rapid rate of program change it has ever experienced over the course of the last 18 months. Product changes implemented in 2013, principal limit factor changes and non-borrowing spouse guidelines implemented this year, and a long-awaited financial assessment announced this week have caused lenders to shift their strategies in order to adapt. Again, and again.

The good news: the changes are leading the industry in right right direction, a Department of Housing and Urban Development official told attendees of the National Reverse Mortgage Lenders Association annual meeting in Miami on Tuesday.

“While we have been announcing changes for 15 months, we are seeing encouraging signs,” said Kathleen Zadareky, HUD deputy assistant secretary for single-family housing, pointing to growth in the proportion of variable-rate reverse mortgages relative to fixed-rate loans, and shifts away from draws of over 90% of the principal limit.


“We are on the right track,” she said.

The industry has adapted time and again to each change, and with agility—an industry quality not seen in the forward market, Zadareky observed in addressing attendees.

Though the changes are working, HUD still stresses several points with respect to reverse mortgage sustainability including the importance of transparent marketing practices, analyzing risk with respect to credit access, and being mindful of non-borrowing spouse issues and guidance, among others.

Further, principal limit factors, which rose slightly this year in the historic low interest-rate environment, are subject to change.

The agency should be revisiting principal factors on an ongoing basis as needed, Zadareky said, in addition to other items that are visited on an annual basis.

When asked by industry participants, Zadareky did not share time frame for announcements regarding loan limits or performance of the Mutual Mortgage Insurance Fund—two items which are addressed annually and have not been addressed yet in 2014.

With respect to future changes, HUD will codify changes in the coming year that were made by mortgagee letters, including the financial assessment, principal limit factor changes and the September 2013 product changes. The industry will have an opportunity to comment during the rule-making process, as will the general public.

Overall, Zadareky told industry members, the program changes are leading the reverse mortgage in the right direction, affirming HUD’s commitment to the product.

“My team is committed, I am committed and the FHA commissioner is committed to the HECM program,” she said. “We have put you through a lot, and it’s probably not quite over yet, but it’s my hope we are going to get through the changes and move on to the part of the industry where you can focus on selling the product.”

Written by Elizabeth Ecker

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  • Well, when you make the fixed rate a fairly useless option of course you will see less of them. And if you cap the draw at 60% wouldn’t you expect there to be fewer people drawing more than 90%? Common sense? The downward spiral of endorsement #’s must be a good sign to HUD as well. I wonder who HUD thinks the product will be sold too…oh wait…the affluent borrower who doesn’t need it.

  • Oh, and while you were all out tearing up our pubic trust, the loan officers were selling your products faithfully as possible without your support.

    • Warren,

      “,,,selling your products faithfully as possible without your support.” This shows how little you know this industry and HECMs.

      HECMs are not the products of HUD. They are the products of lenders. If they meet HECM criteria including LENDERS paying all premiums timely, FHA will insure them as HECMs. If so called HECMs do not meet HECM criteria, HUD is not supposed to reimburse the lender if there is a loss; it is about that simple.

      We are not selling insurance. We originate lender reverse mortgages which may or may not meet HECM criteria; few lenders have originated HECMs which have not met HECM criteria. Why? Lenders do not want the risk of losing the reimbursement in case there is a loss which might otherwise be reimbursable.

      Please get your story straight.

  • I at this point can’t say that I am jumping for joy over the changes with the Financial Assessment ruling. There is a lot to digest in order to make a final conclusion of what the future will bring.

    However, I can see a tremendous amount of paper work increase, I see the process of a HECM becoming very slow and I see our senior clients being out in a daze over all they are going to have to go through!

    I can see in my cloudy Chrystal Ball a lot of confusion as to how mortgagees are going to underwrite the risk. Time will tell what the outcome will be.

    We all have a lot to learn about the FA ruling, it is not just cut and dry. As I start reading the explanations issued in mortgage letters 2014-21 and 22 and its attachments, there is a lot to digest.

    Last but not least, as my friend the Cynic said,why implement the FA ruling now, why can’t we wait and give the changes made that were made in September 2013 a chance to fully prove itself! I agree 100% with the Cynic!!

    John A./ Smaldone

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