Crossing The Line With Reverse Mortgages

Caught like proverbial deer in the headlights, reverse mortgage originators engaged in what is collectively called “cross-selling” are treading ever so carefully – if at all – into such extended marketing activity. According to the national Housing and Economic Recovery Act (HERA) passed last year, “neither mortgagees nor any other party may require mortgagors to purchase insurance, annuities or other additional products as a requirement for, or a condition of, eligibility for HECM insurance” – the government guarantee that facilitates most reverse mortgage lending.

“It should be allowed,” asserts Lisa C. Iannini, referring to cross-selling. But Iannini, chief compliance officer, Genworth Financial Home Equity Access, Inc., Rancho Cordova, Calif., notes that “lenders like us are afraid to take [that] step and ruffle regulatory feathers without express permission.” Such permission, or clarification, in the form of a HUD Mortgagee Letter, has yet to be issued.

“We don’t know if rules will tighten,” says one executive of a large insurance company, who adds that until there is official approval, “Agents are offering to send [reverse mortgage] referrals, but they’re not going full-speed.”  While saying that cross-selling restrictions will be “good for the industry,” the executive is concerned that HUD could “go too far to the wrong side” in prohibiting all cross-selling.

Genworth’s Iannini says regulators may be confused about what cross-selling actually entails. “Ideally,” she explains, “an insurance person would help existing clients who might also benefit from having a reverse mortgage. We have over 100,000 contract insurance agents who could be presenting this opportunity to the right borrower,” she reports.

Neil J. Morse has been a communications professional working in the mortgage finance industry for more than a decade, currently specializing in the reverse mortgage sector. He can be reached at [email protected]

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