In recent months, the Home Equity Conversion Mortgage (HECM) program has seen the arrival of the Financial Assessment and new policy updates regarding non-borrowing spouses of reverse mortgage borrowers.
Though no stranger to rolling with the punches, the reverse mortgage industry may finally find a lasting impact in the most recent round of changes—and in more ways than one.
But amidst all of the change that has already come to pass, and the unknown that lies ahead, one overarching question remains: where does the reverse mortgage industry go from here?
In efforts to address this question, RMD caught up with Peter Bell, president and CEO of the National Reverse Mortgage Lenders Association (NRMLA), to gain a better understanding of where the reverse mortgage industry stands today from NRMLA’s standpoing and how its footing can help move both the industry and the HECM product forward.
Given the Financial Assessment is under way and the non-borrowing spouse issue seems to be getting resolved, how would you classify the footing of the Reverse Mortgage program right now relative to other points in history?
PB: I think that this clears the deck of a lot of problematic issues the industry has faced. While some are concerned that it may eliminate some prospective borrowers from being eligible, i believe it paves the way for a more successful future for the industry.
Do these changes have a more meaningful and lasting impact than past program changes?
PB: It’s hard to say. Changes come about for different reasons.
The HECM program is a relatively new concept—it’s more than 20 years old, which is new in terms of financial instruments that have been around. Demographics have also changed since then. Today’s senior is not the same senior as when the program was initially enacted in the late 1980s.
Lately, there have been headlines more so than before from mainstream media outlets like The New York Times, The Huffington Post—among others—spotlighting the practical use of a reverse mortgage in retirement planning. Could this be viewed as a sign that public perception is starting to come around?
PB: I think that’s a result of the program being around the last 20 years now. People recognize it as a tool that’s here to stay and a lot more people are looking at how a reverse mortgage might be used in other situations, other than the original concept of adding a bit of extra monthly cash flow.
There’s a broader pool of professionals that are beginning to have an open mind to the product and embrace the concept of utilizing reverse mortgages as part of a comprehensive plan. If it starts with professionals, and by that I mean financial planners as well as the financial press, then ultimately that type of thinking will spread more broadly among the population at large.
The real issue, which we’re really just beginning to come to grips with as a country, is the issue of longevity. We have an aging population and an increase in longevity that’s continual. So a lot of the financial planning concepts of the past are strained and, therefore, new solutions need to be found.
What we’re seeing now is that the length of time to support and sustain ourselves post-career is just stretching out so much longer that it’s requiring new thinking about how we fund that longevity. To some extent, the reverse mortgage is ahead of its time because it’s a tool to help address that.
The reverse mortgage has been around for more than 20 years, while the recognition of longevity as a serious societal issue is something we’re just beginning to see over the last five years.
What are the current legislative items on NRMLA’s agenda?
PB: The one legislative item that we have from year to year, until we get a permanent fix on, is the cap on the number of HECMs that FHA can insure.
It’s in the appropriations bills that are pending right now for the new year. That’s really the only matter that is a legislative matter.
Are there any other initiatives NRMLA is working toward in 2015 and beyond?
PB: NRMLA works continually on initiatives in the public relations arena and the educational arena.
We just appointed new Chairs of the NRMLA’s educational committee, which helps develop more professional education for people in the industry and to explore other channels for getting that education out beyond conferences and seminars.
As the reverse mortgage product continues to distance itself from the “Loan of Last Resort” reputation, do you feel there is more work that needs to be done, in terms of industry messaging, to further facilitate this changing perception?
PB: There’s always work to be done. A reverse mortgage is a very sophisticated financial product. The education need will always be there.
It’s like buying insurance—no matter how many times you’ve bought insurance, policies and products change, so you need to be reeducated.
Any sophisticated financial product will always require an educational, consultative sale.
Written by Jason Oliva