Texas Counts 10 Years Without a Reverse Mortgage Enforcement Action

The state of Texas was decidedly late to the Home Equity Conversion Mortgage game, but at least by one metric, the patience and deliberation appears to have paid off.

The Lone Star State’s Department of Savings & Mortgage Lending found no enforcement actions against reverse mortgage originators in the state over the last 10 years, according to a public records request filed by Scott Norman, vice president of national field retail and government relations at Finance of America Reverse.

“As it relates to our unblemished safety record, this is critical information that every planner, banker, and influencer needs to know about,” Norman said. “All of the protections in Texas are built into the constitution. That’s very, very unique.”

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Texas faced a rocky road to Home Equity Conversion Mortgage acceptance due to the state’s homestead laws. Originally enshrined in the Texas constitution back in 1845, the homestead principle prohibits creditors from seizing property to repay a loan in many cases — a concept that stretches back all the way to the 1820s, when the state was still under the rule of Mexico. It also initially prevented lenders from offering reverse mortgages in Texas even as the products became available nationwide, as they could not take ownership of the properties at the end of the loan term.

A 1997 amendment to the Texas constitution changed all that, with voters approving the addition of reverse mortgages to the list of homestead-law exceptions by a vote of 59.6% to 40.4%. That’s how Norman and the Texas Mortgage Bankers Association arrive at the 20th anniversary milestone, though Norman admits that the timeline isn’t quite so clean.

“To some extent, it’s a little bit of a trivia question,” Norman said, noting that it took a second constitutional amendment in 1999 for the reverse mortgage in Texas to reach its current form — while the first HECM didn’t close until January 2001.

But no matter how the industry chooses to measure the milestone in Texas, Norman emphasized that the special circumstances in the state led to increased protections for borrowers and investors.

“It shows that what we designed 20 years ago, and what we finalized 18 years ago, is clearly working,” Norman said.

Norman and the rest of the Texas Mortgage Bankers Association will be celebrating both landmarks at the annual Reverse Mortgage Day conference, held this year in Austin on September 7.

Speakers are slated to include Stephanie Moulton, an Ohio State University researcher who has studied the potential retirement benefits of HECMs; T. Britton Harris III, who manages the endowments of the University of Texas and Texas A&M and formerly served as chief investment officer of the state’s teachers’ pension fund; and former Federal Housing Administration commissioner Brian Montgomery, now vice chairman of Washington, D.C. advisory firm The Collingwood Group.

Montgomery’s name has also been floated in the ongoing search to fill the currently vacant FHA commissioner slot, which is still awaiting an appointee from President Trump.

The Department of Housing and Urban Development’s Karin Hill, as well as National Reverse Mortgage Lenders Association executive Vice President Steve Irwin, will also speak at the event, which Norman said will place special emphasis on the impending implementation of the HECM final rule on September 19.

“As usual, it’s an event that we design around the originator,” said Norman.

For more information on the conference, visit the Texas Reverse Mortgage Bankers Association.

Written by Alex Spanko