Written by Marty Bell, as originally published in The Reverse Review.

On the Docket: Talk With the Officials Following the release of the President’s fiscal 2014 budget in April, 225 NRMLA members took advantage of the opportunity to hear directly from HUD Deputy Assistant Secretary Charles Coulter and his staff during a webinar addressing concerns that the MMI Fund would require a $943 million draw on the Treasury.

“HUD does stand behind [the HECM] program and it’s obvious, looking at the demographics, that there is going to be significant demand for it,” Coulter said during the webinar. “But the product as it exists today cannot stand on its own economically, and so changes need to be made.”

The April 12 phone conference was organized at Coulter’s request to NRMLA President and CEO Peter Bell, as he anticipated a negative press response to the issue. “What shows up—not explicitly but in communications—is that HECM does create a disproportionate negative effect on the insurance fund,” Coulter said.

The need for a positive subsidy (which is government terminology for a gap filler from the Treasury and is a negative occurrence) is a result of loans issued prior to 2009 at the time home values crashed. HUD staff is focused on avoiding additional gaps going forward.

Karin Hill, HUD’s director of Single Family Program Development and the person who manages the HECM program day to day, reported that the changes being considered would address more recent knowledge of life expectancy coupled with a decrease in the average age of borrowers, as well as tax and insurance defaults. Specifically, Hill said the department is considering:

-Incorporating a form of financial assessment of borrowers in the origination process to determine if the senior’s cash flow with the HECM included is sufficient to create financial stability for borrowers going forward

-Implementing “something like a set-aside or escrow” to protect borrowers who start to fall behind on tax and insurance payments

-Limiting draws in some fashion at origination to make sure borrowers have access to cash for longer periods of time

In addition, HUD is exploring potential solutions to the predicament of the non-borrowing spouse who loses a husband or wife and is obligated to pay off the loan or vacate the home. Among the options under consideration are requiring all borrowers who are a couple to both be over 62 or, in the event one is younger, determining the principal limit factor based on the youngest individual’s age.

As previously reported by NRMLA, HUD feels it needs legislative authority from Congress to make the necessary changes in a timely manner. “We want to be clear about what we are grappling with,” Coulter said in summation. “With congressional authority we can issue Mortgagee Letters that reiterate these ideas. That is what we would like to do. But without congressional authority, the only thing we can do is look at collapsing the ARM Standard into the ARM Saver as we did with the fixed-rate loans, or look at principal limit factors. Whatever we do must be effective by the end of this fiscal year.”

In support of HUD’s preferred course of action, NRMLA staff has been engaging with senators and representatives from both parties who serve on the committees that would offer the desired legislation and urging them to provide HUD with the authority it needs.

NRMLA Members Must Disclose All Available Products The Board of Directors unanimously approved Ethics Advisory Opinion 2013-01: Ethical Product Offerings, which requires all lender members to “offer and describe the full range of products and programs generally available in the marketplace that may provide a bona fide advantage to such consumers.” The advisory opinion is meant to protect consumers from being steered into products that are not necessarily the most beneficial given the client’s circumstances.

Members are instructed to have their legal counsels review the advisory opinion to determine what, if any, changes need to be implemented as far as disclosing product offerings goes. If a lender does not offer a product that is otherwise available in the marketplace, then it must provide information to the consumer on that product to remain in compliance.

NRMLA Ethics Course Revisited A group of reverse mortgage company trainers is working with NRMLA to improve the content and delivery of the ethics workshop that all applicants who are pursuing the Certified Reverse Mortgage Professional (CRMP) designation must participate in prior to sitting for the exam.

Trainers Jud Lyman and Chuck Cox of Liberty Home Equity Solutions, Dan Hultquist of Generation Mortgage Company, Craig Barnes of Security One Lending, Lorraine Geraci of Urban Financial Group, and Ken Kanady of Wendover Consulting Services are developing a session focused on a wide spectrum of ethics issues, including advertising, lead generation, appraisals, counseling, product appropriateness, borrower competency and post-closing/servicing. NRMLA’s legal counsel, Jim Brodsky of Weiner Brodsky Kider, offers instruction on NRMLA’s Code of Ethics and Professional Responsibility and its applicability to the everyday workplace.

The group is hoping to facilitate expanded participation in the CRMP program by presenting the new workshop at NRMLA conferences and at various locations across the country throughout the year.

To learn more about the CRMP designation, visit nrmlaonline.org or contact Darryl Hicks at dhicks@dworbell.com.

In Committees The State and Local Issues Committee continues to work on CA AB 553.

The Servicing Committee has been addressing HUD’s recently published FAQs regarding first legal action for cases that move to foreclosure.

The Risk and Compliance Committee is working its way through issues relative to HECM for Purchase, Florida’s Mortgage Lender and Broker Act and the FTC online advertising rules.

The HUD Issues Committee has been working on policy suggestions relative to HECM for Purchase and on originator issues with HERMIT.

The HMBS Issuer Committee is gathering data regarding the potential impact of GNMA Mandatory Purchase events.

New members Acrobat Financial Group, LLC Scottsdale, Arizona Alpha Mortgage, LLC Mandeville, Louisiana Diamond Funding Corp Milford, Massachusetts Bank of England-Cleveland, Ohio branch Westlake, Ohio Residential Finance Corporation Columbus, Ohio

New CRMPs Daniel Matthews, Direct Finance Corporation Norwell, Massachusetts Joe McParland, Direct Finance Corporation Norwell, Massachusetts Bonnie Wallace, Citywide Home Loans, CHL Mortgage Provo, Utah