HUD: Reverse Mortgage Program Changes On the Right Track

The reverse mortgage industry has seen, quite possibly, the most rapid rate of program change it has ever experienced over the course of the last 18 months. Product changes implemented in 2013, principal limit factor changes and non-borrowing spouse guidelines implemented this year, and a long-awaited financial assessment announced this week have caused lenders to shift their strategies in order to adapt. Again, and again.

The good news: the changes are leading the industry in right right direction, a Department of Housing and Urban Development official told attendees of the National Reverse Mortgage Lenders Association annual meeting in Miami on Tuesday.

“While we have been announcing changes for 15 months, we are seeing encouraging signs,” said Kathleen Zadareky, HUD deputy assistant secretary for single-family housing, pointing to growth in the proportion of variable-rate reverse mortgages relative to fixed-rate loans, and shifts away from draws of over 90% of the principal limit.

“We are on the right track,” she said.

The industry has adapted time and again to each change, and with agility—an industry quality not seen in the forward market, Zadareky observed in addressing attendees.

Though the changes are working, HUD still stresses several points with respect to reverse mortgage sustainability including the importance of transparent marketing practices, analyzing risk with respect to credit access, and being mindful of non-borrowing spouse issues and guidance, among others.

Further, principal limit factors, which rose slightly this year in the historic low interest-rate environment, are subject to change.

The agency should be revisiting principal factors on an ongoing basis as needed, Zadareky said, in addition to other items that are visited on an annual basis.

When asked by industry participants, Zadareky did not share time frame for announcements regarding loan limits or performance of the Mutual Mortgage Insurance Fund—two items which are addressed annually and have not been addressed yet in 2014.

With respect to future changes, HUD will codify changes in the coming year that were made by mortgagee letters, including the financial assessment, principal limit factor changes and the September 2013 product changes. The industry will have an opportunity to comment during the rule-making process, as will the general public.

Overall, Zadareky told industry members, the program changes are leading the reverse mortgage in the right direction, affirming HUD’s commitment to the product.

“My team is committed, I am committed and the FHA commissioner is committed to the HECM program,” she said. “We have put you through a lot, and it’s probably not quite over yet, but it’s my hope we are going to get through the changes and move on to the part of the industry where you can focus on selling the product.”

Written by Elizabeth Ecker

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