The Real-Life Impacts of the HECM Overhaul

Shannon Hicks October 13, 2017 8

ePath 100K RM leads

While the sky is not falling, the impacts are undeniable


In our previous episode we discussed what changes to expect as a result of HUD’s most recent changes to the federally-insured reverse mortgage. This week we will examine some real-life scenarios on how the HECM overhaul will impact your business and your future borrowers.

Beyond absorbing the recent HECM overhaul with it’s lower lending ratios, reduced interest rate floor, and a higher upfront FHA insurance premium should prompt two crucial questions- how will this impact my potential borrowers? How should I adjust my marketing and sales approach as a result?
So what’s the impact on new HECM borrowers? Well first we must take into consideration two important factors: higher upfront costs with origination fees and the increased one-time FHA insurance premium and second- the lower recurring costs of the loan due to reduced ongoing margins, and the diminished lending ratios which lower the amount borrowed.

…  Download the video transcript here.
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  1. The_Cynic October 16, 2017 at 7:50 am - Reply

    Be careful about the illustrations and examples you are using. Because of lower Principal Limit Factors and lower growth rates generally, a lot of the research once accepted as correct is now SUBSTANTIALLY incorrect.

    If you want to get on the bad list of an ethical and competent advisor (particularly one with a legally binding fiduciary standard of care) either get outdated information to the advisor or do not get the advisor updated information when you gave the advisor something that is now outdated. It is always a good excuse for an appointment anyway.

    • Shannon Hicks October 16, 2017 at 8:13 am - Reply


      Point taken. All LOS companies (BayDocs & ReverseVision) will be quoting the correct assumed loan balance growth (negative amortization) and assumed appreciation. That said, the new requirement to show all options regardless if the lender offers them should be interesting to see fully implemented by mortgagees.

      • The_Cynic October 16, 2017 at 9:51 am - Reply


        These are not the illustrations and examples I am speaking of although your point is also well taken.

        My comment above is focused on the specific illustrations and examples developed by groups dedicated to reaching out to financial advisers such as that developed by Shelley Giordano and Torrey Larsen. The purpose of these illustrations and examples was to present the various strategies developed since fiscal 2012 or the new rule of 30 which appears to be in question because of the impact of Mortgagee Letter 2017-12. Also beware that the articles posted on financial planning using a HECM are now out of date.

  2. kristine October 17, 2017 at 4:10 am - Reply

    why don’t you explain the points the LO will be paid with the new reverse, it would be very helpful

    Thank you,

    • Shannon Hicks October 17, 2017 at 9:52 am - Reply

      We don’t address the points or commissions paid as they vary from lender to lender and also differ weather the LO is working in retail or as an independent broker.

  3. kristine October 17, 2017 at 4:11 am - Reply

    Please explain the points to the L.O. with the new reverse

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  5. Shannon Hicks October 16, 2017 at 2:19 pm - Reply


    Excellent point on the line of credit (PLF) growth rate being substantially cut due to (1) lower ongoing MIP rates as part of calculation, (2) reduced PLF/lending ratios, and (3) a lower lifetime loan margin. I would argue that your analysis should give us some hope that the LOC growth would not be eliminated, despite calls from AARP to do so.

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