Pricing exceptions are widespread in mortgage — and so are the regulatory risks

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MortgageReverse

Governing Reverse Mortgages

Government’s role in reverse mortgages has always been prominent and now looks like it will become even more important, as private financing remains drier than the Mojave. Yet, some are expressing concern about Uncle Sam’s and Aunt Sarah’s exposure in the sector when it comes to longer life expectancy and continuing equity erosion.

“A lot of loans that have been assigned to FHA are well passed not only the maximum payment amount but the principal limit,” reports Leslie Bromer, senior housing policy specialist, HUD, Washington, D.C. She acknowledges that the agency is on the hook when “we have gone well above what we originally valued that property at. It can be risky if the borrower outlives loan maturity [expectations],” she warns.

Some see HUD’s problems stemming from an inability to “make things happen quickly.” As proof, Cliff Auerswald of All Reverse Mortgage Company, Garden Grove, Calif., notes that when the new HUD Secretary Shaun Donovan took over in February, “he said that the entire agency needed new computers and other updated technology in order for them to make things happen more quickly and that he was making it a priority to do so.”

Joanne Kuczma, director, home mortgage insurance division, HUD, told an audience at the recent (and perhaps final) MBA Mortgage Technology Conference that she had been with the agency for 28 years, “and we manage by crisis.”

And, Arthur Axelson, attorney, ReedSmith, Washington, D.C., a firm which specializes in compliance and secondary market issues, quipped publicly during another industry conference in March: “There’s regular time and there’s ‘HUD time’, which means adding at least six months – at a minimum – to whatever time they tell you [a decision is coming].” Axelson did give HUD credit, though, for recent timeliness in fleshing out details of the Housing and Economic Recover Act (HERA). “They have been amazingly prompt with HERA details,” he said.

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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