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A Plan for Change


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Preparing Yourself for the Financial Assessment

“The reed which bends in the wind is stronger than the mighty oak which breaks in a storm”.

reverse mortgage newsThough centuries old this familiar quote could have been written for the reverse mortgage professional. The last two years have given us both numerous and monumental changes to the federally-insured Home Equity Conversion Mortgage Program. That change is here to stay regardless of our misgivings, approval or apprehension which leads us to the question, ‘how can we prepare for change?’.

Here are five points to ponder in your planning for 2015 and the brave new world of reverse mortgage lending.

1- Adjust your mindset. This is perhaps our most challenging task to date. Even if we strongly disagree with distribution limits, the financial assessment or seasoning requirements for non-HECM liens we must first get ourselves into a mindset of acceptance and implementation. The good news is we have a few months to settle our misgivings and concerns before we reach out to new potential borrowers once the Financial Assessment is enacted. If we skip this step our prospects will sense our hesitation or lack of belief in the program and respond in kind.


2- Prepare your approach. Rather than a script write down the…

Download the video transcript for this episode here.

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  1. A Plan For Change: Point #4 So it’s now going to be OK to eliminate the low income and low value seniors from the Reverse Mortgage Program. If they are sitting on enough equity to do a Reverse Mortgage and it would dramatically change their quality of life, we would not want to do that! After all they can sell their home and move to an apartment and pay rent until they pass away. Who said the low income low value home owners should be allowed to use this program anyway. Let’s make sure we preserve this program for those who simply want to access their equity, NOT those who need to.

    • David,

      I hope your venting helps you. It is rather unprofessional in light of the need to keep the program in tact.

      Not long ago, it was reported that the actuarial report on the HECM part of the MMI Fund for last fiscal year saw a $7.7 billion drop during fiscal 2014. That is right $7.7 billion.

      The person presenting the situation noted that since there were no reported repayments of monies taken from the US Treasury and other MMI programs (which have amounted to over $8.2 billion during fiscal years 2010, 2011, and 2013 with no repayments), this means that somehow the actuaries have concluded that the value of the endorsed HECM insurance since 9/30/2008 has dropped over $7.7 billion. But WHY?

      Home values did not take a nose dive during fiscal 2014. There were no extreme or drastic increases in the note rate being charged on adjustable rate HECMs during fiscal 2014. There were less than 2,000 fixed rate Standards endorsed during fiscal 2014 and about 16,000 adjustable rate Standards. There was not an explosion of endorsements during fiscal 2014 and the Savers and Savers v.2 endorsed during fiscal 2014 can hardly be said to be overly damaging to the MMI Fund.

      So what happened? What was the cause?

      Rather than showing interest in what will keep the HECM part of the MMI Fund healthy, all you seem interested in is the very type of borrower who has damaged and CONTINUES to damage the MMI Fund through their imprudent abuse of a mortgage which is designed to help meet the cash flow needs of seniors through a debt management strategy but has been converted into little more than a payment free mortgage.

      Have you stopped to think why the both the FHA Commissioner and the HUD Secretary have recently left HUD? Both were strongly upbraided by Congress during fiscal 2013 for their management (or as some would say mismanagement) of the HECM portion of the MMI Fund. So after predicting an increase of $1 billion dollars in the ending balance in the HECM portion of the MMI Fund to $7.5 billion, what does Congress see? A negative $1.17 billion. Where did the loss come from? Why did the HECM portion of the MMI Fund perform so poorly and was the senior staff at HUD at fault?

      Have you addressed even a few of these questions?


  3. Is this all we need to look at? Without this basic course of action, we will not be prepared for what is to come. As the old adage goes: “Chance favors only the prepared mind.”

    So while I believe there will be some interesting and difficult new hurdles in front of us during this fiscal year, without preparation for what we do know about how will we ever be prepared for what is yet to come.

    But there is one point which was left out which was odd. Not only do we have a significant first year disbursements limitation (since September 30, 2013) to deal with but we also have a loan long loss in principal limits (also since September 30, 2013) to deal with as well.

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