Written by Marty Bell, as originally published in The Reverse Review.

2014 Off to a Good Start
After last year’s prolonged battle to encourage passage of the Reverse Mortgage Stabilization Act and wait out the resultant changes created by HUD, 2014 arrived with a flourish of encouraging activity for the reverse mortgage industry on a number of fronts.

HECM Insurance Portfolio Improves Significantly
The annual report to Congress on the financial health of the Mutual Mortgage Insurance Fund showed, “Based on the independent actuary’s assessment, the HECM portfolio’s economic value improved by more than $9 billion from last year’s result.”

Both HUD staff and industry participants had anticipated significant improvement due to product adjustments. “All of these changes and adjustments have resulted in a HECM portfolio with a significantly higher balance of capital than in prior years,” the report said. “This gives the program the needed stability to permit FHA to make more fundamental changes to the HECM program for long-term sustainability.”

In an email to FHA stakeholders, Assistant Secretary for Housing/Federal Housing Commissioner Carol Galante said the MMI Fund’s overall value (pertaining to forward mortgages and HECMs) improved by $15 billion since last year and is currently valued at negative $1.3 billion. She said this change represents a 92 percent improvement in the capital reserve ratio, rising from a negative 1.44 percent to a negative 0.11 percent. The independent actuary now estimates that the fund will reach the required 2 percent reserve ratio in 2015, two years faster than predicted in last year’s report.

HECM Loan Limit Stays at $625,500
The Department of Housing and Urban Development announced in Mortgage Letter 2013-43 that it will maintain HECM loan limits at the current $625,500 level through December 31, 2014. The same limit applies to high-cost areas, such as Alaska, Hawaii, Guam and the Virgin Islands.

HUD Appeals Non-Borrower Spouse Case
The U.S. Department of Justice filed a Notice of Appeal on behalf of HUD Secretary Shaun Donovan in the HECM non-borrower spouse case.

In October, a federal district court judge held that HUD’s “non-borrower spouse” regulation was not valid and sent the matter back to the department to “fashion appropriate relief.” The judge’s ruling, among other points, noted that the HECM loan obligation needs to be deferred until the death of both the homeowner and the spouse—even if, as in the two HECM loans involved in the case (Bennett v. Donovan), such spouses were not also HECM loan mortgagors or borrowers.

The case proceeds to briefing and oral argument before the U.S. Court of Appeals for the District of Columbia Circuit, which will likely hear the case sometime next summer.

Programmatic Changes Could Help Change Public Perception
A pair of stories in the press immediately following implementation of the program adjustments indicated the wind was starting to blow in a better direction. National Mortgage Professional reported in its November issue that recent programmatic changes to the Home Equity Conversion Mortgage may not only help improve product performance, but also the public’s perception of reverse mortgages.

Senior Editor Phil Hall wrote that the “problems (both real and perceived) associated with reverse mortgages have trailed the product for decades and have kept it from reaching its fullest potential. A great deal of the difficulty stems from bad publicity.”

Efforts to reform the program, which include eliminating fixed-rate, full-draw HECMs and Congress passing the Reverse Mortgage Stabilization Act, may result in less money for potential borrowers, but nonetheless translate into more consumer confidence about the product.

“The changes should help drive consumer behavior,” Peter Bell, president and CEO of NRMLA, told Hall. “People will be able to take out the actual amount they need upfront and leave the balance in a line of credit. It will be better for everyone.”

Meanwhile, MarketWatch published an article suggesting that consumers’ attitudes about reverse mortgages could shift in the coming years as longer life expectancies will force people to look at their home equity as a resource to pay for medical costs and offset stock market losses.

“By using a HECM as a standby cash reserve, drawing on it during peak demands for cash, other assets can be retained until maturity or recovery,” MarketWatch editor and columnist Amy Hoak said, quoting Peter Bell. “The net result is a greater amount of wealth preserved to fund longevity.”

Hoak also surmised that recent programmatic changes “could make [a reverse mortgage] a safer option for retirees.”

Journal of Financial Planning Publishes Reverse Mortgage Articles
The Journal of Financial Planning continued its coverage of reverse mortgages with two articles in the December 2013 issue that provided further justification for using reverse mortgages as part of a comprehensive retirement plan.

In his article, “The 6.0 Percent Rule,” Jerry Wagner, Ph.D., president of IBIS Software, explains how the traditional 4 percent rule—which refers to the percentage of funds from an investment portfolio that could be accessed on an annual basis so that an individual or couple can sustain themselves for a period of 30 years—can be increased to 6 percent when fixed monthly payments from a reverse mortgage are added into the retirement plan.

Shaun Pfeiffer, Ph.D., and financial planners John Salter, Ph.D., CFP, AIFA, and Harold Evensky, CFP, AIF, contributed their second article on reverse mortgages, this one titled “Increasing the Sustainable Withdrawal Rate Using the Standby Reverse Mortgage.” The findings from this research suggest that using a reverse mortgage as a last resort could be a huge mistake in a rising interest-rate environment where a retiree waits to set up a line of credit in the future.

NRMLA Announces First 2014 Event—Join Us in New York March 18 & 19
The changes being implemented to the HECM program are going to change the way we do business. Our clientele will be altered, our message to them will be revised, we have new procedures to learn to explain—and all this while we plan to launch a new nationwide educational campaign.

Join us on March 18 and 19 for “New HECM, New York: Educating Consumers & Investors,” where we will discuss presenting the new HECM to aging Americans and their children as well as investors and traders.

Replicating the successful, well-attended events of the past two years, once again we are presenting a unique two-in-one conference: our Eastern Regional Meeting and our Investor Forum, all in two days in one location, the beautiful Intercontinental New York Times Square Hotel.

To register for both events at one discounted rate, go to nrmlaonline.org.

Book Your Hotel Stay Today
The Intercontinental New York Times Square is now accepting reservations for our March event. Book your room now at our special group rate by calling 866.875.1978.

You won’t find a lovelier or more convenient hotel location in New York. The Intercontinental sits on the corner of Eighth Avenue and 44th Street, kitty-corner to the home of The Phantom of the Opera and surrounded by all of Broadway’s theaters and many of the city’s finest restaurants. Celebrity chef Todd English’s restaurant is just off the lobby and an entrance to Shake Shack, the most successful restaurant chain in America, is around the corner. All the rooms provide panoramic views of either uptown or downtown Manhattan.

NRMLA Welcomes New Members
NRMLA welcomes the following companies that recently joined the association. They include:

  • Burr & Forman, LLP, Birmingham, Alabama (associate member)
  • Liberty Title & Escrow, Warwick, Rhode Island (associate member)
  • Hometown Mortgage Group, LLC, Lees Summit, Missouri (lender member)

New CRMPs
NRMLA congratulates the following individuals for achieving the status of Certified Reverse Mortgage Professional (CRMP):

Seventy-four individuals have earned the CRMP designation since mid-2010 and every one of them is prominently listed on the NRMLA consumer website, reversemortgage.org.

 

 

 

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