The Good, The Bad and the Reverse Mortgage Financial Assessment Delay

After years of the Financial Assessment looming over the reverse mortgage industry, its delay has been met with mixed feelings—both frustration and relief.

Some industry professionals welcome the delay in the regulation’s implementation, which the Department of Housing and Urban Development (HUD) recently announced would be pushed back to April 27, 2015, eight weeks after its original March 2 effective date.

“AAG supports HUD’s decision to delay the implementation of Financial Assessment,” says Paul Fiore, executive vice president of retail sales at American Advisors Group. “FA is a huge change for our industry as a whole. Extension of the implementation deadline will allow for careful consideration of the many moving parts involved with FA and ensure a proper rollout.”

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Others say the long-heralded rule needs to just roll out so reverse mortgage lenders can adopt “the new way of doing business.”

“The delays are causing more confusion and frustration,” says Certified Reverse Mortgage Professional Beth Paterson, executive vice president of Reverse Mortgages SIDAC. “We just need it in place so that we can accept it, move forward and do loans.”

Years in the making, the Financial Assessment has already gone through several delays, beginning in November 2013 when then-Federal Housing Administration (FHA) Assistant Secretary Carol Galante told attendees at an industry conference that it would grant an extension period past its previous January 13, 2014 implementation date.

Another two delays followed, until HUD announced in November 2014 that the Financial Assessment would take effect for home equity conversion mortgages (HECMs) assigned on or after March 2, 2015.

Since HUD made that announcement, lenders have rushed to prepare for operational challenges and brace for the Financial Assessment’s impact on loan volume, while counselors have ramped up training efforts and geared up for increased costs they expected would arise following the rule’s implementation.

While the Financial Assessment’s latest delay may have been unexpected, it will give lenders and other industry professionals some breathing room as they continue to prepare.

“I was a bit surprised considering the numerous delays in the implementation. However, I see a silver lining in that lenders will have the gift of more time to continue to fine-tune their internal processes, training and technology while HUD completes similar preparations,” says Shannon Hicks, president and co-founder of Reverse Focus, Inc.

The extension period will provide the benefits of a more streamlined process and additional time to continue training originators, underwriters and processors, he adds.

When HUD announced the decision Feb. 12, it cited a delay in the delivery of “certain system enhancements” required to support policies published in Mortgagee Letters 2014-21 and 2014-22.

Driven in part by challenges in technology, the postponement will allow lenders to fully implement the necessary tools prior to the Financial Assessment’s effective date, says John Button, president of reverse mortgage origination software provider ReverseVision.

The software provider has been equipped for the new rule starting March 2 in advance of the new implementation date set by HUD, but says the additional time will help incorporate new features.

“This delay provides a better opportunity for lenders to get the required technology changes — ours, HUD’s and other systems — implemented into their processes before using these tools in regular production,” he says.

Despite some of the positive benefits of the Financial Assessment’s delay, reverse mortgage professionals say it creates an aura of uncertainty in an industry that has seen “monumental changes” to the product over the last few years.

“Reverse mortgage originators may be sensing some confusion and apprehension until the proverbial dust settles,” Hicks says. “While the delay may be welcomed by many, there are those who wish to put this chapter behind as we enter the brave new world of reverse mortgage lending.”

Written by Emily Study