NEW YORK — Citing sources in the Department of Housing and Urban Development, National Reverse Mortgage Lenders Association president and CEO Peter Bell said the industry organization is “comfortable on the direction” of the coming rule changes to the reverse mortgage program.
Toward the end of his opening remarks to the audience at NRMLA’s eastern conference and exposition in New York City Monday morning, Bell said NRMLA doesn’t “see any reason why [HUD] would interfere with the publication” of the Home Equity Conversion Mortgage Final Rule, a series of program changes slated to take effect on September 19.
Bell’s comments came immediately before a lengthy panel discussion about the final rule, the product of public comment and deliberation by various HUD officials.
“We literally looked at every word in the existing regs,” said Karin Hill, a senior policy advisor in HUD’s office of single-family housing.
HUD received 241 comments on the proposed rule changes from members of the public, Hill said, though only 83 “unique comments” received a direct response from the agency.
Elly Johnson, chief operating officer of reverse mortgage lending at United Northern Mortgage Bankers in Levittown, N.Y., called out one particular feature of the final rule as a benefit for the industry: The removal of restrictions on seller concessions in HECM for Purchase transactions. Though not without its own ambiguity — the rule in its current form only specifies that sellers may pay “fees customarily paid by a seller in the locality of the subject property” — Johnson noted that she had heard demand for the rule change at multiple previous industry events.
“This was a big win for us, to be able to have seller concessions,” Johnson said.
The new definitions of “borrower” and “mortgagor” also commanded a significant percentage of the panel discussion, with both Johnson and Leslie Flynne of Reverse Mortgage Solutions diving into the implications of allowing non-borrowing owners to remain in the home after the death of the primary borrower. Flynne emphasized that originators and lenders still have a stake in the servicing game, as heirs often reach out to contacts on the lending side when asking for advice on how to handle the loan satisfaction process.
She said originators should tell their borrowers to add non-borrowing spouses to the title immediately, noting that the process can be complicated — or even impossible if the spouse waits until after his or her borrower dies.
Flynne also touted the “alternate contact” feature of the HECM final rule, which requires mortgagees to request the name of third-party person who could help servicers get in touch with borrowers who may not respond to phone calls.
“It’s very difficult to get ahold of the right person,” Flynne said. “Elderly people like myself don’t answer the phone because they feel somebody’s asking for money.”
Having a secondary contact person — who, Flynne emphasized, has no power of attorney or other conservatorship rights — can help prevent tax and insurance defaults by providing an alternate channel to seniors, Flynne said.
In addition to the stated rules, the HECM final rule would give the Federal Housing Authority commissioner the ability to make a variety of future changes, such as allowing borrowers to use funds from a HECM line of credit to pay off unsecured debts in order to meet residual income standards implemented under the Financial Assessment program, as well as lowering the price at which properties can be sold “as necessary” to meet market conditions. However, as multiple panelists mentioned, that position is currently vacant.
The new rules are notable for what they do not include. Hill gave a list of policies that HUD punted on codifying, including a proposal to put a cap on the annual and lifetime interest rate adjustments for adjustable-rate HECMs, a plan to require HECM for Purchase borrowers to complete counseling before signing a contract, a revision to the H4P program that would allow applicants to apply for the loan before receiving a certificate of occupancy, and an expansion of the term “property charges” to include utilities, due to concerns that electric or gas fees could usurp the HECM’s first-lien position.
Hill said HUD did not have a timeframe toward implementing those changes, adding that they required further study before potential implementation.
Written by Alex Spanko