Reverse Mortgages Need ‘Further Consideration’ Says BBB Official, Overlooking Key Developments
A reverse mortgage can be a viable financial tool for seniors in certain situations, particularly if they are looking for extra cash and / or are aging in their homes. Seniors should keep in mind, however, that valuing a reverse mortgage loan at face value based on what the industry says about it may not be the right decision based on past cases of regulatory intervention. This is according to a Better Business Bureau (BBB) ââofficial in a guest column published in the Daily Memphian newspaper.
However, some of the information presented by the BBB official is objectively out of date and does not take into account the more recent developments and regulations of reverse mortgage products when making claims in the article, based on a review by RMD.
“The [reverse mortgage loan] the product can be used for any purpose, including home improvement, funding a more comfortable retirement, or paying off an existing mortgage or medical bills, âwrites Randy Hutchinson, president and CEO of the BBB of the Mid-South serving parts of Tennessee, Mississippi and Arkansas. âThe amount you can borrow depends on your age and the equity in your home. There are no credit requirements, but for a federally guaranteed loan, you must meet with a housing counselor to discuss whether a reverse mortgage is the right product for you and to assess your ability to pay the costs. taxes, insurance and maintenance costs over the life of the loan.
Hutchinson goes on to explain that a report on the Reverse Mortgage Program released in 2012 by the Consumer Financial Protection Bureau (CFPB) found that 10% of reverse mortgages were in default due to non-payment issues related to taxes. and insurance.
Important context lacking caution, HECM action by Obama and Trump
However, an important background information that is missing from this fact is that the June 2012 report to which Hutchinson refers came in the infancy of the CFPB, and before several years of consistent new regulation of the Home Equity Conversion Mortgage (HECM) program by the federal government. Housing Administration (FHA) and several presidential administrations from the two main political parties.
Not only has the Barack Obama administration seen the signing of the Reverse Mortgage Stabilization Act of 2013 which authorizes the Secretary of the United States Department of Housing and Urban Development (HUD) to establish additional requirements to improve tax security and the soundness of the HECM program. , but Donald Trump’s administration increased premiums and tightened loan limits on reverse mortgages amid concerns about the strength of the program and taxpayer losses to the Mutual Mortgage Insurance Fund (MMIF).
This approach was followed in 2018 by the implementation of a collateral risk assessment, which sometimes results in the requirement of a second real estate appraisal. These changes largely resulted in a demonstrable atrophy of the reverse mortgage industry, although Trump administration officials claimed at the time and in the years that followed that the changes showed signs of having the expected health effects of the HECM program in early 2021.
Biden’s program actions so far
Joe Biden’s outgoing administration has also been active in its management of the HECM program over the past year, primarily in its efforts to respond to the economic upheaval caused by the COVID-19 coronavirus pandemic. The day after his inauguration, President Biden extended a moratorium on foreclosures on borrowers in FHA-insured mortgage programs and announced four new core protections for eligible non-borrower (NBS) spouses in a mortgage transaction inverted.
“The HECM program must continue to evolve to keep it viable for everyone,” HUD Deputy Principal Assistant Secretary for Housing Office and FHA Lopa P. Kolluri said at an association event industry trade earlier this month. âAs we have seen in the past, changes such as adding collateral risk assessment and associated requirements for second assessments to support collateral assessments can make a measurable difference in the financial performance of the program. The stable financial performance of the HECM portfolio allows us to take faster action on how we manage the political and operational components of this program.
The column also only briefly mentions the reverse mortgage counseling requirement, which is conducted to ensure borrowers fully understand the mechanics of their loan and the obligations that accompany it. This is not to say that the information presented is incorrect, but neglecting the main developments since the cited incidents may not lead to the clearest perspective on what the reverse mortgage industry and the federal government have. made to improve the health of the HECM program.
Read the Daily Memphian column.