Op-Ed: Welcoming 2020 and Reflecting on a Year of Reverse Mortgages

When I first joined Reverse Mortgage Daily a little over one year ago, I had a hard time telling a HECM from a ham sandwich. Perceptions about the reverse mortgage industry on my end were probably not too dissimilar from the perspectives encountered by originators having exploratory conversations with clients, or initial counseling sessions trying to offer people a basic understanding of the complexities inherent in reverse mortgage products.

Having come from an undergraduate academic field of study that was primarily focused on American politics, one of the things that immediately attracted me to the job of covering the reverse mortgage industry was its regular interactions with that world in Washington, D.C. I’ve come to realize that a unique perspective on the reverse mortgage industry emerges when it is looked at through the prism of politics, but seeing how those in the industry aim to shape it on its own terms is also very interesting.

Still, as an industry observer it seems as if the proliferation of private alternatives to traditional HECMs is learning from the most popular features found in the FHA-backed product, and is bringing them forward in an efficient way that frames the beginning of new product formulation around much of the “borrower-first” framework that has shaped the HECM in recent years, and that focus will likely mean positive things for the industry in the years to come.

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Proprietary promise

Coupling that with the accelerated pace of research that indicates that reverse mortgages have a legitimate place in the future of American retirement, and you have a viable, possible path toward retirement stabilization for a cash-strapped generation of older Americans. Independent research sponsored by the non-profit Brookings Institution has concluded that reverse mortgages have cause to serve an expanded role in retirement for American seniors, while recognizing and acknowledging that the product category comes with imperfections that people inside and outside the industry continue to try and address.

Not only do you have a plethora of proprietary offerings from Finance of America Reverse (FAR) that are given further reach through a correspondent partnership with American Advisors Group (AAG), but you also have more companies jumping into the private reverse mortgage fray at Reverse Mortgage Funding (RMF), Longbridge Financial, One Reverse Mortgage and Liberty Home Equity Solutions.

Those companies are increasingly shaping their non-government offerings off of the template established by the modern HECM program, which is an efficient choice considering how HECMs have been forged under the weight of scrutiny from many different perspectives and stakeholders.

Products forged by years of HECM reform

One thing that the government-sponsored reverse mortgage product cannot escape from is additional reforms made at the legislative and administrative levels with an eye toward program stabilization, which always has the potential to disrupt the industry significantly. This is demonstrable when looking at changes including the principal limit factor (PLF) cuts from October 2017, and the collateral risk assessment introduced the following year.

Those who express concern about what the government may want to do to the program now find themselves with additional options by leaning further into the increasing prominence of proprietary products.

Fiscal 2019 has shown reduced volume when compared to the year before, and most providers of proprietary reverse mortgages are not yet willing to share data on private originations with the rest of the industry (much to the chagrin of RMD). Still, many of the emerging political realities – including vocal support from powerful, former program opponents – coupled with the increasing availability of private reverse mortgages, should be encouraging for an industry that could likely use some good news.

Of course, what the industry does with the presentation of these potential paths is anyone’s guess, but it should make 2020 an interesting year to watch. After a year on the job of covering the “beat” of reverse mortgages, it’s been nothing short of fascinating meeting such a diverse array of personalities, all sharing an overriding, predominant concern for the seniors they’re dedicated to serving.

My hat’s off to you, reverse mortgage industry. You’re full of surprises, and I’m looking forward to seeing how you prepare to reinvent yourself yet again as we now say hello to the year 2020.

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  • Many were encouraged with the tone of the NRMLA Convention. It seemed like things were looking up with growth almost everywhere.

    Well very early this morning (1/1/2020), HUD dropped a bomb. HECM endorsements for December 2019 were just 2,461. That was a drop of 13.4% from the November 2019 total endorsements of 2,842 and worse, a

    • (Continued from above)

      25.3% drop from total endorsements for October 2019 of 3,296. In fiscal 2019, only four months had totals worse than the endorsements in December 2019 but two of those months were months in which HUD could not endorse new HECMs. Portions of those two months were during the partial government shutdown (December 2018 and January 2019). The next worse month in fiscal 2019 (August 2019) had 2,341 endorsements or 0nly 120 fewer endorsements than for December 2019. Finally, the fourth worst month for fiscal 2019 (September 2019) had 2,420 endorsements which was only 41 fewer HECM endorsements than the endorsements for December 2019.

      By the way not only is RMD bothered by proprietary reverse mortgage (PRM) lenders not providing monthly closing numbers on PRMs, there are more than a few of us in the industry who find this problematic as well. I recently attended a meeting of HECM loan officers where the head of a RMI top 50 HECM originator and a TPO told us that the head of the largest PRM servicer told him that for every new HECM they receive there is one new PRM received. At his invitation I followed up but with someone who oversees operations at that same servicer and that individual was quite surprised by those numbers. He estimated it was much closer to 1 PRM for every 10 HECMs even though recently during one month the servicer received closer to 1 PRM for every 5 HECMs. Of course that servicer does not service all HECMs closed each month.

      If we are to be trusted as an industry it would help to have reliable information to lean on. With rare exceptions, HUD provides us with reliable information when it comes to HECMs. One of those exceptions was information on the losses from the HECM portion of the MMIF especially following the oversight of the HECM program by then FHA Commissioner Brian Montgomery in early 2009 through November 2016 shortly before HUD Secretary Carson took over at HUD.

      Based solely on recent monthly reports produced by HUD since mid November, the monthly HECM endorsement and case number assignment number reports do not match the anecdotal optimism of just 7 weeks ago. As pointed out in a different comment, there are more humans alive today than have ever died in all of history but not so with active HECMs (HECMs not terminated and not assigned)., where terminated and assigned HECMs (655,000) exceed the current portfolio of active HECMs (487,000) by about 168,000 HECMs. While the human population is still growing, the portfolio of active HECMs has been shrinking. And so it goes.

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