Reverse Mortgage Industry on the Cusp of a New Era

After several years of program changes, the reverse mortgage industry is facing its biggest change yet: the Financial Assessment.

“We are on the cusp of entering a new era of the business” said Peter Bell, president and CEO of the National Reverse Mortgage Lenders Association during its eastern regional event in New York City.

The assessment is meant to provide a set of underwriting standards that borrowers must meet in order obtain a reverse mortgage. This new process, while it could impact volume in the short term, should be beneficial to the industry over the long term, according to industry participants. Many have implemented training programs and other preparations in advance of the changes to ready for the assessment’s implementation.


“Everybody needs to embrace the changes,” said Joe Demarkey, principal at Reverse Mortgage Funding. “This industry has been ridiculously resilient. We survive every single time [there are changes to the program].”

American Advisors Group (AAG), the largest reverse mortgage lender in the country, anticipates it could see a 10% to 12% drop in business as a result of the changes being made. Other lenders have made separate estimates ranging from as little as 3% to 5% to more than 15%.

But despite the expected short-term decrease in business, after a last-minute delay to the rollout of the changes now scheduled for April 27th, some in the industry are ready to move on and see how it impacts the industry overall.

“We are excited to get it on with. It’s a new chapter for the industry,” said Reza Jahangiri, AAG’s chief executive officer.

The new chapter or era that lenders are describing has been a long time coming.

Over the last three years, the industry has adapted to several principal limit changes, utilization restrictions, counseling changes, and now the Financial Assessment — which many hope could be the last major change for some time.

“Financial Assessment is the last leg to the structural changes to make the program sustainable,” Demarkey said.

Written by John Yedinak

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  • It is interesting that the talk about sustaining is no longer that the HECM program is self-sustaining. It is that it will be sustaining.

    To be clear the program has never been self-sustaining as most of us have proudly told consumers over the years. Taxpayer dollars have always paid for HECM program operations and administration at HUD; that is a situation any private insurance company would love to have but does not. Imagine if the HECM operational and administrative costs of HECM lenders were paid for by Uncle Sam, HECM lender profits would soar.

    MIP, the only revenue to HUD from the HECM program, was simply intended to cover reimbursements of lender losses from the accrual of interest, MIP, and servicing fees along with borrowed principal along with some of the costs of assignment. As we have all seen, according to the actuaries, all HECMs endorsed after 9/30/2008 have failed to do that.

    While I am every bit as confident as Joe about the ability of the HECM program to survive as a result of HUD changes, not long ago I read where one of the executives at NRMLA reminded us that an important HECM player in Congress had introduced legislation last Congressional term that among its many provisions would have eliminated the HECM program. So on one hand we have people like Joe (and me), a long-time elected NRMLA official, brimming with confidence about the future of the industry and at least one NRMLA executive employee reminding us of concern for its survival. How odd!!

  • AAG is wise to choose a reasonable and rational range as to lost business.

    Those who chose 3% to 5% are among the ultra optimists in the industry who know no other way to deal with fear including their own. Rather than trying to diagnose why our endorsements do not grow they tell us next year we will have 100,000 endorsements and tell us not to listen to naysayers. You know them.

    Then we have those who talk about business loss of 30% and far more. They are the true pessimists among us. They have no idea what industry losses will be and find that making ridiculous predictions as the best way to deal with their inability to make rational and reasonable estimates of the loss in total business and their own fears.

    Realists seem to believe that the range will be between 10% to 30% with a large number estimating the percentage at between 10% and 15%, a huge blow to the industry in annual total endorsements for fiscal 2016.

    Many of us, however, refuse to get involved in estimating the exact number because we factually claim that we do not know nor do we have sufficient evidence from which to extrapolate the loss to the entire industry.

    What is clear is that we all hope that the endorsement count for fiscal 2016 will be the bottom for the remainder of this decade.

  • I feel the article was well written and on target. We must embrace the new changes, we don’t have a choice. Those that will accept what has been implemented and what will be implemented in the near term will eventually prosper.

    I see good things on the horizon, we have about 8,000 seniors daily turning 62 years of age, many of them own homes and have equity in them. accept what is, educate yourself, work hard and prosperity will be at the end of the rainbow!

    John A. Smaldone

    • John,

      Why fold? I agree that if and when HUD implements financial assessment, accept financial assessment and move on. We are not there yet and the NEED for financial assessment is not clear due to the current housing economic environment, lower principal limit factors, and the first year limitation on accessing proceeds.

      HUD has never conceded the immediate need for financial assessment. They are responding to the outcry of lenders when we did not have the changes which were implemented after September 29, 2013 in place.

      A request for indefinite delay is not the same as a demand for change in financial assessment.

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