HUD Unable to Forecast Next Steps on Reverse Mortgage Proposals

As the Department of Housing and Urban Development reviews the multitude of comments it received on its most recent proposed changes to the Home Equity Conversion Mortgage (HECM) program, there is no timetable for when the agency might take any action on these proposals.

HUD is currently in the process of reviewing the variety of responses it has received on its proposals from reverse mortgage lenders, servicers, secondary market investors, senior consumer groups, among other industry stakeholders. At the close of the public commenting period on July 18, the agency garnered a total of 85 public comments.

When prompted by RMD as to when the industry can expect an update on the rulemaking process, a HUD spokesman said the agency is currently reviewing public comments and is unable to forecast its next steps.

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The rule, which HUD first issued in May, intends to codify and reinforce several recent HECM reforms that have been implemented by the Federal Housing Administration over the past several years, while also introducing some new rules for federally-insured reverse mortgages.

In the nearly three months since HUD introduced the rule, reverse mortgage industry personnel have voiced concerns for certain proposals, predominantly HUD’s intent to cap lifetime interest rate increases on adjustable-rate HECMs to 5%.

Many industry members also expressed their opposition to the proposal that would amend the definition of “property charges” to include utilities as part of the Financial Assessment. Under this proposal, a borrower’s failure to pay such utilities would result in a lien, thereby potentially triggering the reverse mortgage to become due and payable.

“We respectfully request that, if adopted as proposed, the FHA make clear that utility charges not be included in the expenses of the calculation of borrower obligations for purposes of the LESA under Financial Assessment,” wrote the National Reverse Mortgage Lenders in its comment submitted to HUD.

Consumer groups, such as AARP and the National Council on Aging, also urged HUD to reconsider its proposal on including utilities as property charges, though they took different stances with other proposals.

As the reverse mortgage industry and senior consumer groups await further action from HUD, the agency is tasked with deciding whether to proceed to issue a final rule based on its review of the submitted comments.

Based on the results of its review, the agency may choose to issue a new or modified proposal, withdraw the proposed rule entirely, or take no action on the proposal, according to HUD’s rulemaking process.

Written by Jason Oliva

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  • Do any of us have the slightest idea who these HUD employees are who will be making these decisions about the future of the program? Do we know if they have any experience with the HECM program? Do they have any education or background in finance or mortgage lending? If they have questions about the program like “how do they work?”, or “what happens to the loans after they are originated?”, or “Is it necessary to have a separate form for each disclosure or could we consolidate four or 5 or more on a single page?”, who do they ask? Yes, it is important that we know. They should not be making decisions about this program in a vacuum.
    Don’t laugh, over the years HUD has assigned persons to oversee the HECM program who didn’t know the first thing about HECM’s and strangely enough we never even ask about their credentials!
    Strange in deed.

    • hecmvet,

      I believe that you are mistaking FHA HECM insurance for a product of a free, independent enterprise. It is not. Although your arguments are reasonable and cogent, they do not address the regulatory process. There is no legal requirement that those who oversee this or any FHA program have experience with the program they are overseeing. The proposals are legal and can be implemented. It is up to us to convince the reviewers that the proposals do not not have merit or will result in damage to the program and those for whom it was designed to help.

      • Wrong again Cynick, I am not “mistaking the HECM product for a conventional “non-government” product. You seem to agree that HUD doesn’t have a responsibility to involve informed, experienced, financially educated, personnel in affairs of the HECM program but this does not relieve our industry from the responsibility to understand who is involved and what their credentials are. We will NEVER have a say in the future of this program until we take it upon ourselves to be more proactive and involved with HUD on a daily basis. Our industry Trade Association and Leadership is AWOL in these matters because they don’t see themselves having a voice. They are completely wrong on this point.

      • hecmvet,

        It is clear you have no experience with government regulation. IRS rules and regulations make HUD rulings and regulations look tea leaves in the bottom of a tea cup. Try the oil and gas and steel making industries and see how well their industry trade associations do with regulatory oversight.

        FHA does not believe it is regulating mortgages but its insurance. If you do not like its rules, you are completely free to make a living offering reverse mortgages which are not insured by FHA. Many people who are smarter, more talented, far more wealthier, and with large working forces have tried to do just that but failed.

        HUD is HUD and according to at least one Democratic state chairperson you and I are nothing more than bogus peddlers preying on seniors. HUD is not obliged to listen to us. If you think HUD is, then you do not understand the regulatory process or our position in it.

        So go ahead and howl like a wolf. Someday someone will hear and not understanding your meaning will simply bump you off.

  • IS HUD considering individual reverse mortgages to condo owners??? I am more than qualified and want to stay in my condo. I can easily stay where i am if i become disabled.

    • Ms. Haggerty,.

      There are legal financial reasons why HUD would not do what you suggest. Your collateral is potentially worthless if the HOA is in financial trouble or is in a lawsuit.

      The best way to be deal with your issue is to be truthful. It is also the cruelest.

      • Do not understand your comment about being truthful. People are working on getting approval for a section of our condominium, and i am hoping. I have been to a condo that was just approved and the property values are half the value of ours.

      • Ms. Haggerty,

        First, I do not know your situation or that of your HOA, although you have written about your ineligibility a few times before. If those you had contacted you before had not gotten back to you about the status of the change in HOA approval legislation, that would seem to indicate that they judged that even with the changes, you would be no different now than when they had tried to get approval in the past. Assumptions can betray us as well as a lack of facts from those we are attempting to serve.

        So whether it was my assumptions or a lack of factual information as to your current situation, I apologize for any misunderstanding. The new law provides some new hope although an HOA that did not qualify in the past may not qualify under the new law as well.

        Please keep us posted as to your situation.

    • I think you should wait if you have the time and see what the effect of HR3700 is on the future of Condo loans in regard to FHA insurance. While the Critic is correct, condominiums do present a greater risk for HUD and therefore the projects themselves do undergo an approval process in addition to the individual home or unit, President Obama just signed the above referenced Bill into law on July 29th which is meant to ease HOA approvals.

      HUD/FHA now has to draft the rules that will be followed pursuant to the new law and that could take a few months (and we’ve seen things like this take even longer depending on their sense of urgency), but the law is now in place to ease the rules.

      So while no one can say what the new rules will allow just yet and I do not know the reasons why your project was not approved, there is hope and I do not agree with the “cruel honesty” as described by the Cynic. If you would like to contact us directly, I would be happy to take your information and once the new rules are completely announced, we can let you know if your project or unit would now be acceptable for reverse mortgage financing. If you need a 30 day solution, I can honestly tell you that HUD does not move that quickly on most issues and I would not advise waiting but if you have some time, it might not be as hopeless as others have led you to believe.

      All Reverse Mortgage®
      https://reverse.mortgage

      • I don’t have a lot of time, I am getting older by the minute and i would like to enjoy some of the time i have left, while i still can. Here’s hoping that my section of this beautiful condominium will get approval for my section.

      • Thank you for your offer to help. The Hoa and the Management company are dragging their feet in getting the info and that is why we have not yet applied. I am hoping we will be eligible. There are 5 sections in our complex. Hoping that our section with 42 units in 7 building will be accepted. The Hoa which we pay thru our common charges only is for the common areas. Our section is run by a President , board and management company. I am not sure how others complexes are managed.

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