A Pledge to Reverse Mortgage Borrowers

By Peter Bell

At our meeting in Washington, DC the first week of March, NRMLA’s Board of Directors voted unanimously to implement signing and abiding by the Pledge to Reverse Mortgage Borrowers as a requirement for association membership.  This was a reaffirmation of the viewpoint of the committee of members that worked on writing the Pledge.

The Pledge is the anchor of the Borrow with Confidence campaign, a national effort that we are about to launch created to provide another and even higher level of assurance to America’s seniors that their best interest is our priority.  Its 19 points promise integrity and clarity throughout the reverse mortgage experience.

Why do we need to provide this additional assurance at this time?  Well, all you have to do is read last week’s jolt from within the financial services industry: Greg Smith’s Op Ed in the March 14 New York Times about quitting Goldman Sachs because, as he writes, “it makes me ill how callously people talk about ripping their clients off.”  Suspicion about financial service providers is rampant in the press and the public, and with inappropriate home mortgages pinpointed as the cause of our nation’s recession, it can be hard to argue.  But that doesn’t mean we don’t try to distinguish our business from the other sectors of financial services.  And if this effort is going to be taken seriously, we need to prove that we’re different to back up our claim.

The best evidence we can provide is the most transparency and the fewest surprises for consumers—which are the precisely the goals of Borrow with Confidence.

In addition to the Pledge, our initial Borrow with Confidence effort includes a  Road Map to Reverse Mortgages, which is a step-by-step guide through the loan process.  As an addendum to the Road Map, we have created a tool of advice for children of reverse mortgage borrowers called Should My Mom and Dad Get a Reverse Mortgage? And all of these tools are available and easily findable to consumers on the newly designed reversemortgage.org website.

These tools have been created with input from lenders, originators, servicers, closing agents and counselors all across the country and reviewed before release by our Executive Committee and our Board.  And we are grateful to all of you who contributed.  But despite all the thought and experience that went into them, they will only be trusted if adhered to with unanimity.  One bad egg can ruin the taste of the whole soufflé. We cannot settle for anything less than a 100% buy in to these principles from those who choose to affiliate with NRMLA--which is why a written commitment to the Pledge is from here on in a requirement for membership of the organization.   

If You're Not Part of the Solution...

by Peter Bell


A few weeks ago, Illinois Attorney General Lisa Madigan told a group of seniors she is "getting more and more complaints about reverse mortgages all the time."  A month earlier, Attorneys General Kamala Harris (CA) and Catherine Cortez Masco (NV) announced they were combining forces to crack down on mortgage fraud.   In January, a Florida loan officer along with three co-conspirators were sentenced to 24 to 70 months in prison each and forced to pay over $2 million in restitution for a reverse mortgage fraud scheme. And February ended with the sentencing of six reverse mortgage conspirators in Georgia to a combined 30 years in prison for, among other charges, forged deeds, false appraisals, inflated property values and false down payments.

All of this disappointing news comes at a time when we are noticing an overall improvement in the press's attitude towards reverse mortgages.  An informal audit of printed press, visual media and digital media across the country over the past month shows there were 25 positive stories about different aspects of reverse mortgages.  The only negative stories for the month were reports on the Illinois Attorney General remarks and of the sentencing of the Georgia conspirators.

At a NRMLA meeting in Chicago a few years back, a representative of the city's Office on Aging told us that she had 100 cases of elder financial abuse on her desk and more than 50 of them were complaints within families.  Though anecdotal evidence is not the most dependable, it seems to tell us that there are fraudsters who target our product to steal grandma's funds.  It's easy to say, these are not reverse mortgage problems, they are societal problems.  The money stolen could just as easily have been (and often is) from a CD or a Social Security check.  No lender oversees how the funds are controlled once a loan is made. 

Some say we can't cure every ill in society. But I believe that if the product we advocate is an element of financial abuse and fraud, we cannot simply turn our backs on the problem.

As an industry--and as the industry's trade association--we need to confront these problems.  We need to collaborate with personal finance experts, gerontologists and the new multidisciplinary elder abuse centers to figure out how we might devise safeguards.  We need to work with the experts to find  ways to build widespread awareness of the methods of abuse and insulate our clients from those who prey upon them.

Selling a financial product comes with responsibility that extends way beyond closing the deal.

A New Political Year

by Peter Bell

The annual release of the President's budget is political new year's day in Washington. It triggers the beginning of a whole new cycle of negotiation, advocacy, relief to some and disappointment to others.

A budget is not just a set of numbers; it's a philosophy.  It's the government's approach to the coming fiscal year, a set of priorities as well as of lesser concerns.

For those of us in the reverse mortgage business, the news in this week's release of President Obama's FY2013 budget (which covers expenditures from October 1, 2012 through September 30, 2013) was good. There are two primary numbers in the current HUD budget structure that are most significant to us: one is the projection for the Mutual Mortgage Insurance fund and the other is the money for counseling.

Since the HECM program is by statute required to be net neutral annually, each year we need an evaluation from the Office of Management and Budget (the President's budgeting office) that projects the HECM portion of the MMI fund will not lose money and need an appropriation.  If an appropriation were required from Congress in this deficit-obsessed environment, the future of the HECM program would be extremely vulnerable.  But the new budget scores the HECM program at -0.921, and though that looks negative, in Washington-speak it means the fund's revenue is expected to be positive and support is unnecessary.

As for counseling, the FY 2013 budget asks for $55 million, about ten per cent of which usually goes towards the HECM program.  That's a $10 million or 22% hike over the proposed FY 2012 counseling budget.

The release of the President's budget is just a table setter.  It kicks off a long, complicated and politically-charged process. Were the House of Representatives controlled by the President's party, it would take the President's budget and work from it.  But with the opposition in control, it appears as if the Republicans plan to pass a budget of their own.   With two different budgets (or philosophies) on the table in an election year, what is the Democratic controlled Senate to do?  Republican voices claim Senate Majority Leader Harry Reid has already told them he won't even try to pass a budget until after the 2012 election.

When a budget is in limbo, the vehicle for assuring continuing operation of the government is generally a Continuing Resolution (CR).  Since no FY 2012 budget has been passed, we are now operating via a CR that runs through the end of this fiscal (September 30). Under a CR, programs continue at budget levels from the last passed budget.

So what does this mean for our industry for the rest of the year?  That business can continue as is without us having to fight for an appropiation or to preserve the loan limits or maintain the current MIP premium.  And so we can devote our time to expanding consumer knowledge of and demand for reverse mortgages.

For information about the National Reverse Mortgage Lenders Association, click here.