On the Docket: Who Is Our Market?
We’ve heard a lot of discussion amongst the membership about the need to persuade financial planners not to ignore reverse mortgages because of the product’s cost. Since HUD began implementing the latest set of HECM program changes, we’ve heard about a shift from need-based to want-based customers, from those burdened with debt to those responsibly planning retirement.

The goal we’ve set for the Extreme Summit national educational campaign is to expand volume from 50,000 to 300,000 loans within four years. In order to achieve this, the ad hoc committee of company marketing heads and NRMLA’s senior staff are managing the effort day to day, working to hone in on the audience that can provide us the best chance for the most volume. Here’s where we’ve landed:

By all reports, fewer than 8 percent of Americans engage financial planners. At the same time, about 50 percent of Americans have little or no savings. But it’s that 42 percent in between these two groups that is our sweet spot, those Americans over the age of 62 with some assets, including a home, but not enough assets to give them complete security.

New Academic Report Reconfirms Value of RMs as Retirement Funding Option
Current and future retirees need to re-examine their views and consider including a reverse mortgage in their retirement plan, because the three legs of the traditional retirement “stool” (Social Security benefits, pensions and personal savings) have been considerably weakened, according to an article in the March edition of the Journal of Financial Planning.

In their article, “Retirement Trends, Current Monetary Policy, and the Reverse Mortgage Market,” University of Wisconsin-Superior associate professors David W. Johnson, Ph.D., and Zamira S. Simkins, Ph.D., state that the recent recession has eroded retirement portfolio values and increased retirees’ dependence on Social Security.

“The long-term solvency of the Social Security system, however, is uncertain. Thus, having alternative sources of retirement income is important. Reverse mortgages are one possible alternative,” they say.

A lack of planning and unrealistic expectations about future costs of basic health care and long-term care has placed many retirees in an untenable financial position, further strengthening the argument for using reverse mortgages.

The article highlights the fact that Americans tend to store more than two-thirds of their wealth in their homes, which implies that housing, as a retirement asset, will grow in importance in the future.

The article grows the trove of favorable research to appear in the past few years from Boston College’s Center for Retirement Research, Texas Tech, the Sacks Brothers and, most recently, Jerry Wagner.

AARP Sues HUD Again Over Non-Borrower Spouse Issue
(Editor’s note: The following was written by NRMLA’s legal counsel, Jim

Brodsky, of Weiner Brodsky Kider, PC.)

The AARP Foundation Litigation group, on behalf of four additional non-borrowing surviving spouses, has sued HUD, again, in the U.S. District Court in the District of Columbia (Plunkett v. Donovan, filed February 27, 2014). This lawsuit follows its successful suit against HUD, in this same court, in Bennett v. Donovan.

In the earlier Bennett case, the court ruled that the portion of the National Housing Act related to non-borrowing spouses “means what it says: the (HECM) loan obligation is deferred until the homeowner’s and the spouse’s death.” In the earlier Bennett case, the court ordered HUD to fashion appropriate relief to implement that requirement.

Although, as noted by NRMLA in prior Weekly Reports, HUD is reportedly going about doing just that, though it has yet to release a Mortgagee Letter or any other formal announcement describing its plan.

The most recent complaint filed in the Plunkett case argues that “time is of the essence” when it comes to protecting affected non-borrowing spouses, and essentially that HUD is taking too long to address the issue. The AARP Litigation group has asked the court to take immediate action through the issuance of an injunction against HUD that instructs the department to protect the four named plaintiffs and the “class” they represent (as further defined below) from being displaced (through foreclosure actions) from the homes in which they reside. The class for which the Plunkett lawsuit requests protection is defined in the complaint as

one that “includes any current or future surviving spouse of a (HECM) borrower who was married to a borrower at the time the (HECM) mortgage was consummated, was not listed as a borrower on the mortgage, and where the lender states that the mortgage is due and payable due to the death of the borrower, and the subject property has not been sold to a third party.”

On behalf of that class, the complaint in Plunkett seeks injunctive relief protecting them from displacement from such homes. The Plunkett complaint was filed recently and HUD has not yet responded to it, nor, of course, has any “class” been certified or any injunction issued.

Insurance Fund Performance Improving
Barely six months after the U.S. Treasury injected $1.7 billion into the Mutual Mortgage Insurance Fund to offset projected HECM losses, the Obama administration released a proposed fiscal year 2015 budget that forecasts a more positive long-term outlook for the program.

HECM was scored with a negative credit subsidy of .23 percent, which equates to a $35 million surplus for the 2015 book of business. That means insurance premiums, plus other collections by FHA, are forecasted to exceed payouts on insurance claims by that amount. At the conclusion of the current fiscal year (September 30, 2014), HECM is projected to make an estimated $55 million.

FHA is projecting HECM endorsements to total $15.86 billion in 2015, compared with $13.49 billion in 2014.

Rasky Baerlein Merges
Rasky Baerlein Strategic Communications, which conducts public relations efforts for NRMLA, has merged with Prism Public Affairs, vastly increasing the size of its staff and resources in Washington. The new firm, Rasky Baerlein/Prism, will have Larry Rasky as chair and CEO, as well as Prism leaders Dale Leibach and Amanda Deaver in prominent roles.

New Acting DAS
February 28 marked Charles Coulter’s last day as Deputy Assistant Secretary (DAS) at the Department of Housing & Urban Development. We welcome the new Acting DAS, Kathleen Zadarecky.