Reverse mortgage originators, especially those with ancillary life and long-term care insurance offerings, are chafing at what they regard as “vague” rules governing product cross-selling. Last year, sweeping legislation enacted by Congress – the Housing and Economic Recovery Act (HERA) – held that “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.”
But, the words “require” and “requirement” have muddied the waters, according to originators who argue that such lack of clarity intimidates reverse mortgage providers and ultimately shortchanges seniors. “It’s up to insurance and investment companies” to decide such matters,” fumes Jeff Lewis, senior managing director, Guggenheim Partners, New York, who says language in the year-old law is “wrongheaded and ends up having a detrimental affect. It’s hopelessly vague,” says Lewis, insisting that “HUD knows they don’t regulate these things.”
One Florida originator flatly criticizes the HERA Act as having “disrupted the HECM industry.” As a result, he reports hearing “that seniors are having a tough time finding a qualified originator to explain this product to them.” For his part, Lewis is hopeful the housing agency will issue rules clarifying what products may or may not be sold in conjunction with reverse mortgages. “That’s when we’ll have a chance to [understand] the regulations, but it will still be on all of us to do what’s responsible.”
And, that may be ultimately where the issue comes to rest, he says – originators acting in the best interest of seniors “who ought to have the freedom to use their home equity,” accessed with a reverse mortgage, to purchase other products. A lot of good can come about if is properly controlled,” according to Lewis. “It’s really about how people are compensated. We don’t want to gang up on senior to generate commissions.”
The Florida originator cautions against “rushing rule changes and writing hurry-up mortgagee letters [that] cause unintended consequences.” He recommends creation of a “HUD Originator Council used to vet changes.”
Written by Neil Morse
