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Drinking from a Firehose


The anticipated slowdown in HECM changes has yet to materialize

firehoseIs our industry drinking from a firehose? Consider the last eight years that have left our industry in a continual state of flux as we grapple with the ever-increasing pace of change for the Home Equity Conversion Mortgage program. For perspective let’s examine the deluge of changes each of you and our industry has endured.

2008: Enactment of the SAFE Act requiring national licensing and registration of all mortgage loan originators. Reverse mortgage professionals struggled as tests were overwhelmingly weighted toward traditional mortgage product knowledge and regulation.

2009: The HECM for Purchase was introduced along with a nationalized lending limit of $625,500. A brief refinance boom followed as homeowners in areas with previously low county lending limits benefited.

2009: FHA slashed the Principal Limit or lending ratio factors reducing the amount of money homeowners can access…

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  1. Hi Shannon, The ever changing landscape has me trying to carefully and and with an ever positive attitude teach my clients that the best time to get a reverse mortgage is NOW! (before the next change hits!) The winds change seem to be headwinds and I pray that this much needed product can withstand them. I believe the boomers need our help!

  2. No Shannon
    The changes will not stop. You have a lot of government young lawyers that need a job to do that they have to be working on something, Right or wrong does not come into to play. It can be compared to cancer . If they discover a cure look at the thousands of non-profit and for profit people it would put out of work.
    We as L.O.s have a cancer they just call it HUD,FHA and CFPB All in the name of protecting
    the public from us bad guys.
    Cliff Riddle

    • Cliff,

      Many of the changes have nothing to do with us. While several of HERA changes did just that, where are there any since that time? The HERA changes attacking us came from a Democratically controlled Congress, not HUD, not FHA, and not the CFPB (which was not even in existence at that time).

      What HUD/FHA failed to do was reduce losses occurring in the MMI Fund for several years through tweaking the HECM financial model. Instead it had to be done in two significant changes. The first came in early fiscal 2011 with a horrendous increase in the ongoing FHA MIP rate from 0.5% to 1.25% and the other was the termination in two steps of all Standards, first on March 31, 2016 with the fixed rate Standards and then on September 30, 2013 with adjustable rate Standards. As part of the September 30, 2013 move, FHA also added “safeguards to HECMs.” On April 27, 2015 after years of complaining about its lack by lenders, FHA established financial assessment believed by some to be far more draconian than even the lenders intended.

      So in the end, the changes which have been adopted since July 30, 2008 (the date HERA was signed into law) have been to save the MMI Fund, keep borrowers from strategic defaults, and pacify the cry of lenders.

      I cannot agree that the rules that have created less HECM endorsement volume were done to stop “the bad guys (us).” Most of the changes were done to make the program less threatening to MMI Fund.

  3. Ms. Nance brings up an interesting point, the place of Baby Boomers in our industry. Last fiscal year boomers produced about 46% of all endorsements and are at about 42% this fiscal year. Yet with about 33 million Baby Boomers now over 62 years old,

    Yet is that what we anticipated back in 2007, just 27,000 HECM endorsements from Baby Boomers in fiscal 2016? Anyone of us who would have predicted that lousy of a number back then would have been tarred, feathered and ridden out of the industry on a steel rail for being so pessimistic.

    It is not like no Baby Boomers will originate HECMs, it is how few of them do. In an era of high home equity for seniors, such low volume is all but incomprehensible for this large cohort. With 33 million already over 62 years old, there are about 42 million more Baby Boomers who will turn 62 before the last Baby Boomer turns 62 on 12/31/2026.

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