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The pace of change to the Home Equity Conversion Mortgage (HECM or reverse mortgage) program has rapidly accelerated in recent years. First we had several principal limit factor reductions, the introduction and subsequent removal of the HECM Saver program, the elimination of the Standard HECM products, two-tiered FHA insurance premiums and first year distribution limts. Recently HUD enacted a new policy for Non Borrowing Spouses (NBS) with new PLF tables which goes into effect this August 4th which should be shortly followed by a finalized Financial Assessment measuring a borrower’s financial capacity. How does one keep pace?
First FHA can and will make policy changes quickly as they see fit via mortgagee letter due to their new authority in the Reverse Mortgage Stabilization Act of 2013. The lengthly rule-making process no longer applies allowing for swift and sudden program modifications. Such rapid tweaks to the program can be beneficial in addressing issues as they arise but also create frustration and confusion for both lenders and the consumer alike. One could say the only constant for the HECM program is change itself.
Policy changes may present unique opportunities. For instance, while imperfect, the Non-Borrowing Spouse policy may allow for many to revisit previous loan prospects who walked away due to their concern of the younger spouse being able to remain in the home after the older borrower passes away. It also will garner positive press amongst consumer advocacy groups and financial professionals. Similarily the Financial Assessment while increasing origination efforts and underwriting will be received similarly. Perhaps our industry tagline should read “this is not your grandparent’s reverse mortgage”.
Not suprisingly many of these changes have not been openly embraced by many reverse mortgage professionals. Collectively we want strong consumer protections but not at the expense of further narrowing our potential market with borrowers having to pass through the filter of numerous regulations and underwriting standards. Unfortunately further restrictions seem to arrive during a down market where we can ill afford further reductions in volume. What remains is how we will both prepare and respond in the coming months as these new policies take effect.
How do you anticipate preparing or even leveraging your business in light of these recent changes? What advantages and disadvantages do you anticipate? Please share your ideas in the comment section below.