With 2016 coming to a close, it’s that time of year where RMD recaps the most popular reverse mortgage news stories of the year.
A lot happened in the reverse mortgage industry this year. Federal regulators proposed new rules and consumer protections for the Home Equity Conversion Mortgage program; an industry player decided to shutter its reverse mortgage operations; and a mustachioed Hollywood star entered the ranks of reverse mortgage product spokesmen.
In other news stories, the CEO of a top industry lender was ousted as part of a company-wide management shakeup, and one nationally syndicated personal finance columnist publicly changed her tune on the role reverse mortgages can play in retirement.
Without further ado, here are the top-10 most-read reverse mortgage news stories in 2016:
10. December 1 — Reverse Mortgage Loan Limit to Increase in 2017
After several years of stagnant reverse mortgage lending limits, the Federal Housing Administration announced it will raise limits “slightly” in 2017. For Home Equity Conversion Mortgages, the maximum claim amount will rise to $636,150, up from $625,500, for reverse mortgage case numbers issued on or after January 1, 2017. These new limits will be in effect throughout the year ending December 31, 2017.
9. August 4 — BNY Mellon to Shutter Reverse Mortgage Operations
After two years in the reverse mortgage business, Bank of New York Mellon called it quits in 2016 and announced plans to fully liquidate its holdings in the sector by the end of August. The decision to terminate reverse mortgage operations, the company told RMD, stems from BNY Mellon’s desire to put greater focus on its core asset management business, which primarily includes institutional and intermediary retail investment solutions. Though BNY did not originate reverse mortgages, the company purchased HECMs and served as a closed loan buyer to Mahwah, N.J.-based reverse lender Longbridge Financial.
8. September 18 — HUD Proposed Rule Would Bring ‘Catastrophic Losses’ to Reverse Mortgages
A proposal this year that would require HUD mortgagees to assign HECMs to FHA once they reach 98% of the maximum claim amount (MCA), industry advocates argued, would adversely impact the future of the HECM program by exposing market participants to higher costs and potentially catastrophic losses. Group such as the Mortgage Bankers Association and the National Reverse Mortgage Lenders Association voiced their opposition to the supplemental proposal from HUD, in efforts to dissuade the agency from adopting this suggested policy into its formal rulemaking.
FHA proposed a number of substantial changes to the HECM program in May, including a requirement that would force lenders to assign HECMs to FHA once they reach 98% of the MCA. As the industry digested the latest series of rule updates, popular belief suggested that the new proposals will affect virtually every aspect of doing business in the reverse mortgage sector.
Following a partially granted Freedom of Information Act (FOIA) request issued by HUD, a California-based non-profit group called for a moratorium on any additional reverse mortgage foreclosures by CIT Group, Inc. (NYSE: CIT) and its subsidiary, Financial Freedom. The call for a moratorium was based, in part, on new data that the California Reinvestment Coalition obtained from HUD, which indicated that Financial Freedom/CIT Group’s share of reverse mortgage foreclosures since April 2009 is more than twice as much as the company’s market share.
In reverse mortgage celebrity news, American Advisors Group (AAG) made headlines this summer when it announced the choosing of Emmy and Golden Globe award-winning actor Tom Selleck to be the company’s newest reverse mortgage spokesman. Selleck, who at the time was starring on the hit CBS series “Blue Bloods” (2010-2016), joined AAG as the national spokesman in the midst of the company launching a multi-faceted marketing campaign, which included new advertisements, a new AAG tagline and updated collateral.
Thanks to various program changes in recent years, reverse mortgages have been winning over everyone from financial advisors to community banks and the mainstream press, and even one nationally recognized personal finance commentator who admittedly changed her view on the product. Personal finance writer Jane Bryant Quinn (AARP, The Washington Post, Newsweek) chatted with RMD this year upon the release of her sixth personal finance book to discuss the biggest challenges retirees face today and the factors contributing to her change of heart on reverse mortgages.
3. October 14 — RMS President Ousted in Major Walter Leadership Shake-Up
Top-10 reverse mortgage lender Reverse Mortgage Solutions (RMS) made industry headlines this fall, following an announcement from its parent company, Walter Investment Management Corp. (NYSE: WAC), that nine executives would be leaving the company, including the President of RMS, the reverse mortgage subsidiary of Walter. The terminations, according to Walter, were part of the company’s plans to “flatten” its operating team, with the goal of improving company communication and simplifying its management structure.
2. September 27 — New FHA Condo Rules Expand Access to Reverse Mortgages
In response to changing conditions in the condominium market, FHA proposed new rules that would allow individual condo units to become eligible for agency financing—a move that harkened back to the FHA’s previous “spot loan” days for approving HECMs on a unit-by-unit basis. The proposal, which “certainly includes HECMs,” according to a HUD spokesman, will differ from the previous “spot approvals” process, though the agency did not divulge further details at the moment.
The biggest reverse mortgage story of the year arrived in May, when FHA proposed a set of new rules aimed at strengthening the HECM program, including changes to the origination and servicing process. The proposed rule, which served to reinforce and codify recent HECM reforms implemented by FHA over the past several years, also intended to add new consumer protections.
Such proposed changes included making certain that required HECM counseling occurs before a mortgage contract is signed; require lenders to fully disclose all HECM loan features; cap lifetime interest rate increases on all HECM adjustable rate mortgages (ARMs) to 5%; reduce the cap on annual interest rate increases on HECM ARMs from 2% to 1%—an aspect of the proposal considered highly controversial among reverse mortgage industry members.
To date, HUD and FHA are still in the rulemaking process on the proposal.
There you have it, the top-10 RMD news stories of 2016. Thank you for all of your ongoing readership and continued support this year. Here’s looking ahead in 2016!
Editor’s note: The top stories list is based on traffic data received on Reverse Mortgage Daily content compiled January 1, 2016 through the publication date of this article.
Written by Jason Oliva