Reverse

Feature: Kathleen Zadareky

Written by Jessica Guerin, as originally published in The Reverse Review.

When Kathleen Zadareky took over as deputy assistant secretary of single-family housing at HUD last year, the department’s reverse mortgage program was in the midst of a drastic overhaul. But the mortgage industry veteran charged ahead unfazed, picking up where Charles Coulter left off and working diligently with her staff to implement the changes mandated by Congress’ Reverse Mortgage Stabilization Act, confident they would put the program back on track.

Zadareky, who earned a degree in finance from the College of William and Mary and an MBA from Vanderbilt University, says she is passionate about the issue at hand. “I was working at Freddie Mac during the Great Recession, and when I saw what happened to the mortgage industry during that period, I sat back and I [decided] to focus on taking my career in a direction that worked with organizations that would maybe change some things for the better,” she says.

Zadareky made a career change, taking a job with the CFPB before a position became available at FHA. “I jumped at the opportunity to come back to my roots in single-family housing and work on issues that are really close to my heart,” she says.

As deputy assistant secretary, Zadareky is responsible for all aspects of FHA’s single-family housing operations in both the forward and reverse spaces—including program management, servicing and REO management, quality control and institutional risk management.

“What I love about this job is that I get a chance to work on issues that really matter and actually make change,” she says. “Not surprisingly, what’s frustrating is, I have neither enough resources nor time to do everything I would like to do. There’s always more that I’d like us to be working on, but we do what we can with what we have.”

Zadareky says she feels her work at FHA has a tangible impact, and that’s what makes it so rewarding. “It’s great that it means something,” she says. “Showing up here every day, I know it matters.’”

Overhauling the HECM

It has been about a year since Zadareky took over for Coulter, and in that time the reverse mortgage program has been considerably revamped. Zadareky says a number of factors went into HUD’s decision-making. Mainly, she says, “It stemmed from an understanding that the program wasn’t working as we intended, and that was showing up in its impact on the MMI Fund.” Zadareky also says the trend toward large upfront draws was part of the concern. “People were taking all of the money out early in the life of the loan, and we were seeing a lot of tax and insurance defaults. So consumers were not being successful in retaining their homes.” She says HUD also assessed whether the amount a consumer could access through the loan was effectively reflecting current house price appreciation, which led to changes in principal loan factors.

Now, Zadareky says, the changes reposition the program as a tool to help seniors plan for retirement. “When the HECM program was originally created, the expectation was the funds would be drawn out over time by seniors to help with living expenses, medical bills, other types of expenses,” she says. “By limiting how the funds can be accessed, limiting the initial upfront draw, [we are ensuring] that there are funds over time available for retirement needs.”

The Impact of Change

When it comes to Financial Assessment, Zadareky acknowledges that the industry is under pressure to adapt. Just recently, the agency pushed back its implementation nearly two months to accommodate for delays in system enhancements required to support the new policies. “Clearly, this is a big change in the origination process. We are adding a review that previously was never part of the process, so we absolutely acknowledge that this is work for the industry to get ready for this.”

But while the industry may struggle in its adaption of the new rules, Zadareky says she is confident that Financial Assessment will improve the program in the long run. “I think it’s going to change who is actually approved for a HECM loan in the future, and while that can maybe mean a decline to some people, we expect it will ensure that the right people, those who will be successful over the long term of the program, will be the ones [who are] approved.”

When asked about the possibility of more modifications down the road, Zadareky says she thinks their work is nearly complete. “I knock wood and hope we are just about done. There are a few more changes in the servicing space that we’re working on around due and payable status, and clarifications on loss mitigation options. Those should be coming out in the next couple months, and then I think we’re hoping we’re largely done making change and the industry can focus on its adoption of those changes.”

Zadareky says she believes the policy changes have set the program back on track. “We are very hopeful that the changes we have put in place are the right ones and will lead to the long-term sustainability of the product,” she says. “But with this product, if there’s one thing I’ve learned, it’s that we’ve got to monitor it and continue to review it over time. We have pushed a huge amount of change into the industry. Now we need to see how the industry will adopt that change and how it plays out now that it’s reality.”

Looking Ahead

Now, Zadareky says, the industry can do its part to advance the program by continuing to help seniors successfully access their equity—and by connecting with the right type of consumer. “I think the key is making sure that whatever [the industry does] supports the sustainability of the product. We need successes. Seniors who are successful with their reverse mortgage programs will go a long way to build continued interest in it and driving others to seeing it.”

“We’ve had a great partnership [with] the industry as we’ve undertaken this work to put the program back on solid footing. We’ve asked a lot of them and they have been very responsive and very flexible, and I think… between the industry and the work we’ve done here at FHA, [we’ve made] sure that this program has a long-term trajectory.”

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