After several years of program changes, the reverse mortgage industry is facing its biggest change yet: the Financial Assessment.
“We are on the cusp of entering a new era of the business” said Peter Bell, president and CEO of the National Reverse Mortgage Lenders Association during its eastern regional event in New York City.
The assessment is meant to provide a set of underwriting standards that borrowers must meet in order obtain a reverse mortgage. This new process, while it could impact volume in the short term, should be beneficial to the industry over the long term, according to industry participants. Many have implemented training programs and other preparations in advance of the changes to ready for the assessment’s implementation.
“Everybody needs to embrace the changes,” said Joe Demarkey, principal at Reverse Mortgage Funding. “This industry has been ridiculously resilient. We survive every single time [there are changes to the program].”
American Advisors Group (AAG), the largest reverse mortgage lender in the country, anticipates it could see a 10% to 12% drop in business as a result of the changes being made. Other lenders have made separate estimates ranging from as little as 3% to 5% to more than 15%.
But despite the expected short-term decrease in business, after a last-minute delay to the rollout of the changes now scheduled for April 27th, some in the industry are ready to move on and see how it impacts the industry overall.
“We are excited to get it on with. It’s a new chapter for the industry,” said Reza Jahangiri, AAG’s chief executive officer.
The new chapter or era that lenders are describing has been a long time coming.
Over the last three years, the industry has adapted to several principal limit changes, utilization restrictions, counseling changes, and now the Financial Assessment — which many hope could be the last major change for some time.
“Financial Assessment is the last leg to the structural changes to make the program sustainable,” Demarkey said.
Written by John Yedinak