The Trump Administration & Reverse Mortgages

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How will the Trump administration approach reverse mortgages?

reverse mortgage newsDoes one of the first decisions made by the Trump administration foreshadow the future of the reverse mortgage program? The administration’s decision to rescind a recent FHA mortgage insurance premium reduction was swift- within one hour after President Donald Trump took the oath of office. How will a business-minded administration approach the Home Equity Conversion Mortgage program?

Mortgage lenders should brace themselves for change. The Trump administration team made it clear they intend to dismantle the Dodd-Frank Act, a complex set of banking and lending regulations that have been criticized for their complexity and hurdles for middle class borrowers in obtaining credit. In addition the Consumer Financial Protection Bureau faces a substantial makeover. While both parties agree that consumer protections are needed, they disagree as to how that goal should be achieved.

Does this mean the Trump administration will be anti-reverse mortgage? By no means. However the ambition to reduce spending and waste should deliberate on the unintended consequences inherent in policy changes, specifically for today’s aging homeowners. With most retirees having less than $50,000 in savings the need to finance one’s longevity using their home has never been greater. Housing has become the lynchpin upon which the majority of American’s wealth is built.

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HECM Terminology is Confusing at Best

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Our Name & Terminology May Be Turning Away Potential Borrowers

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Principal Limit Factor? Really?!

“Words have meaning and names have power”, said Spanish author Miguel de Cervantes. Perhaps this is something the reverse mortgage industry should strongly consider. The 27-year-old Home Equity Conversion Mortgage program is struggling to expand its reach in an ever-growing marketplace. Is our reverse mortgage terminology confusing older homeowners? Does our name need to be rebranded?

For many years I have chafed at the term ‘reverse mortgage’ opting instead for Home Equity Conversion Mortgage, considering widespread product confusion and lingering misgivings born from negative media stories. Even better perhaps we should adopt “Equity Release Mortgage” as our new flagship name as our counterparts in the U.K. and Australia have branded a similar offering. During the NRMLA annual meeting in Chicago, some members argued that the name “reverse mortgage” carries a negative connotation, in the sense that a person is moving “backward”. Create your own user feedback survey

Beyond the argument that our product needs a new name, is the confusing and often contradictory terminology in the HECM itself. The principal limit, while known within our industry, is completely foreign and alien term for older homeowners who have only been exposed to standard mortgage terminology in their working years. Some industry members argue that ‘available proceeds’ is more descriptive. Maximum Claim Amount, or MCA, is another example of industry jargon thrust upon HECM borrowers. Instead, some suggest renaming this to the ‘FHA Lending Limit’. The fact is that mortgage applications are loaded with an alphabet soup of acronyms. With HECM loans layering another set of loan terms, confusion is sure to follow, not to mention increased consumer uncertainty…

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Interest Rate Cliffhanger

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The Potential Impacts When the Fed Raises Interest Rates

Federal Reserve Fair Open Market Committee meeting
Federal Reserve Fair Open Market Committee meeting

It’s been a cliffhanger of sorts. The U.S. economy appears to be recovering yet their are fundamental issues that are not resolved. In the wake of the financial crisis of 2009 interest rates have been held at historic lows. Good news for reverse mortgage borrowers and lenders alike.

For several months the word on the street has been that the Federal Reserve would be increasing short term interest rates. Last Thursday the Fed announced postponing any rate increases until later this year, perhaps waiting for improvements in the labor market.  Until then the question is what would the impact be for the federally-insured reverse mortgage?

Jerry Wagner of Ibis Software said “Short-term rate hikes of 0.5% or 1% will have little effect. Long term rate hikes have a big effect as Principal Limit factors will be smaller.” Today Home Equity Conversion Mortgage interest rates are keyed to the…


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