Looking Back: Last Year at NRMLA

Last year began with a fanfare of thuds at NRMLA: an audit of HUD that showed a need for a draw on the Treasury to balance the Mutual Mortgage Insurance Fund; a proposed amendment to a bill by Sen. Bob Corker calling for a two-year moratorium on the HECM program; a request from HUD asking for the authority to make “blunt changes” to the program; and an Appeals Court ruling in Bennett vs. Donovan that surviving spouses forced to sell their homes have a right to sue HUD.

As if those were not enough discouragements and hurdles, the year also saw the House Financial Services Committee narrowly pass an FHA reform act that eliminates the HECM program entirely in two years; various holds from senators on the legislation HUD needed to shore up the MMI Fund’s future; and an FY 2014 president’s budget that showed a $5.2 billion shortfall in the HECM part of the MMI Fund that led one congressman to blurt out at a hearing, “Why does the HECM program even exist, given the costs?”

And as 2012 came to a close, our annual meeting in San Antonio coincided with a front-page story in The New York Times that attacked aggressive reverse mortgage lending and the wooing of borrowers with the promise of “free money.” But 2013 wound down on a different note, one that was optimistic and even enthusiastic. At 2013’s annual meeting in New Orleans, FHA Commissioner Carol Galante thanked NRMLA for partnering with HUD to fix the program, and our executive committee presented an annual review titled “A Year of Stabilization & Renewal.”

The primary and perhaps game-changing effort of this past year was the grinding effort to push the Reverse Mortgage Stabilization Act of 2013 through both houses of Congress. The one-sentence bill required literally hundreds of meetings and phone calls among NRMLA senior staff Peter Bell and Steve Irwin, our legislative advocacy team (including Melody Fennell, David Horne, Scott Olson and Larry Rasky), and members of Congress and their staff. But in a year in which only 26 bills have made it through the grinder, this legislation, sponsored by Reps. Denny Heck (D-WA) and Mike Fitzpatrick (R-PA) in the House and Rep. Robert Menendez (D-NJ) in the Senate, passed with bipartisan support and unanimous consent.

This bill has legs. In addition to altering the HECM program, it immediately seemed to alter the national conversation from the moment the president signed it into law on August 8. Over the next few weeks, positive stories appeared from prominent reporters—celebrity journalist Jane Bryant Quinn recommended the use of the line-of-credit option, the Wall Street Journal’s Kelly Greene showed how the wealthier are using reverse mortgages, and The New York Times’ Tara Siegel Bernard described the shift in reverse mortgages from a desperation tool to a financial planning tool. In fact, from the day of the president’s signing until this writing, 78 percent of press coverage about reverse mortgages all across the country has been positive.

Meanwhile, on the state level, NRMLA persuaded the sponsor of a California bill requiring face-to-face counseling that the idea was not practical and the bill was dropped; the association also persuaded the Massachusetts legislature to add a third two-year delay to the implementation of its face-to-face counseling initiative; and in a yeoman effort that demonstrates the power of individuals, Scott Norman of Sente Mortgage ushered a bill legalizing the HECM for Purchase through both houses of the Texas State Legislature and a popular vote in Texas.

Once the good news started, it seemed to keep rolling:

• Our Reverse Mortgage Market Index, which measures aging Americans’ home equity, jumped to its highest level since before the Great Recession
• A national education effort lead by Otto Kumbar of Liberty Home Equity Solutions called the Extreme Summit gained financial support from member companies and planned a first-quarter 2014 pilot prior to a wider launch
• Our consumer website, reversemortgage.org, soared from about 10,000 hits per month at the end of 2012 to more than 31,000 in October 2013
• NRMLA’s magazine and consumer site were honored with awards from the International Marketing and Communications Association

As 2013 began, it was difficult to imagine it would go down as a very good year for the reverse mortgage industry. And yet here we are, entering 2014 with the pending launch of the new reverse mortgage, with many of the obstacles and objections of the past behind us and lots of promise ahead.

Kudos From the Commissioner

“You understood the challenges we were facing and stepped up to the plate,” Assistant Secretary for Housing/Federal Housing Commissioner Carol Galante told the 565 attendees at NRMLA’s Annual Meeting & Expo in New Orleans on November 4. “The FHA could not have [passed the Reverse Mortgage Stabilization Act of 2013] without you.”

“I am here to tell you,” Galante continued in her keynote address, “we are in this together. And when you see the problems seniors are having saving for retirement, it’s easy to see why we invest the time and energy.”

Galante said that the way the HECM program was previously structured was not sustainable. She reiterated past remarks by both Deputy Assistant Secretary Charles Coulter and herself that they had always preferred to make “more nuanced changes” rather than use a blunt instrument or see the program done away with all together, and that the legislation that NRMLA worked on side by side with the department made that possible. The first set of these changes—including limitations on first-year draws, merging the HECM Saver and Standard into one product, PLF table adjustments and insurance rates varying according to draw—were implemented October 1.

Then she warned the gathering, “There is no perfect policy. We are committed to monitoring the impact of the changes and make sure we’re not over-changing. But even if we hit it right, there are people who can find a loophole. We need to be able to depend on an industry that is going to respect the rules and self-police. It is going to be really important that a few bad actors don’t spoil it for the rest of us.”

In Committee

NRMLA submitted public comments to FHA in October, seeking clarification on numerous issues pertaining to the implementation of Financial Assessment.

Starting January 13, 2014, loan originators will need to begin performing financial assessments. It’s a highly complex topic that revolves around capacity, willingness and compensating factors to determine whether set-asides are necessary.

The Policy Committee, with assistance from NRMLA’s outside legal counsel, crafted detailed comments that can be broken down into six primary categories or topic areas:

1. The need to take into account HECM proceeds in the dissipation equation
2. The need to remove any discounting of asset
3. The need to make lifetime expectancy set-asides a requirement only if the applicant fails capacity AND willingness
4. The need to grant borrowers the ability (or option) to retire unsecured debt at the time of closing and incorporate the reduced debt service in the capacity calculations
5. The lack of minimum standards for the willingness test
6. The lack of any quantitative guidance regarding the “borrower authorization” to pay property charges from a monthly payment or line of credit

The Board of Directors approved two Ethics Advisories—one that discusses anti-churning and the new single lump-sum disbursement payment option, and a second that deals with the ethical considerations affecting HECM initial MIP decisions—crafted by the Standards & Ethics Committee, with assistance from NRMLA’s outside legal counsel, in response to the publication of Mortgagee Letter 2013-27.

“Ethics Advisory Opinion 2013-3: Ethical Refinancing of HECM Single Disbursement Lump-Sum Payment Option Loans and Anti-Churning Practices” restricts members from refinancing Single Disbursement Lump-Sum Loans within the 12-month period after closing.

“It is the view of the Committee that planned repayments of HECM single disbursement lump-sum payment option loans into other HECM loans, within the 12-month period following the closing of such initial HECM loans, can seriously impede the development and vitality of the secondary market for HECM loans,” the advisory said.

“Ethics Advisory Opinion 2013-4: Ethical Considerations Affecting HECM Loan MIP Premium Decisions” illustrates how the upfront MIP can change dramatically if the total initial loan disbursement exceeds 60 percent of the principal limit. In the example provided, a consumer with a $200,000 home and $100,000 initial principal limit takes a loan disbursement of $61,000. Because the payout is more than the 60 percent threshold, the consumer pays an upfront MIP of $5,000 (2.5 percent of $200,000), whereas if the same person had taken $1,000 less, he would have paid $1,000 in MIP (0.50 percent of the MCA).

“This Ethics Advisory Opinion 2013-4 requires that NRMLA members describe to consumers, in a clear and timely manner, the amounts of the Initial MIP that they will owe to HUD under the disbursement amount elections reasonably available to such consumers, and compare those amounts with the amounts such consumers will receive as initial disbursements as a result of their elections,” the advisory’s opinion stated. To read both advisory opinions, please visit the Code of Ethics section on nrmlaonline.org.

Welcome to NRMLA’s Board At the business meeting held each year as part of the annual meeting, the membership unanimously approved the following members to serve on our Board of Directors for the following year:

Co-Chairs: Joseph DeMarkey, Reverse Mortgage Funding LLC George Lopez, James B. Nutter & Company

Vice Chairs: Jim Cory, Legacy Reverse Mortgage Reza Jahangiri, AAG

Secretary: Scott Norman, Sente Mortgage

Treasurer: Sherry Apanay, Urban Financial of America (UFA)

Officers: Mark Browning, Home Equity Conversion Corp. Nicholas Buscaglia, M & T Bank Colin Cushman, Generation Mortgage Company George Downey, Harbor Mortgage Solutions, Inc. Marc Helm, Reverse Mortgage Solutions Michael Hild, Live Well Financial Sarah Hulbert, 1st Reverse Mortgage USA Otto Kumbar, Liberty Home Equity Solutions John LaRose, Celink Chris Mayer, Longbridge Financial Steve McClellan, UFA Jerold McCoy, Nationstar John Nixon, Bank of America N.A. Robert Sivori, Reverse Mortgage Funding LLC Gregg Smith, One Reverse Mortgage LLC Robert Yeary, Reverse Mortgage Solutions

Ex Officio: Barton Johnson, Premier Home Equity Cheryl MacNally, Generation Mortgage Company James Mahoney, James Mahoney & Associates Joe Morris, Open Mortgage, LLC Jeffrey Taylor, Wendover Consulting Inc.

We welcome all of them.