Reverse Mortgage Lenders Group Pushes for Changes in Exam Guidelines


The National Reverse Mortgage Lenders Association (NRMLA) requested for amendments in the Reverse Mortgage Examination Guidelines (RMEGs) to reflect regulatory changes since its last update three years ago.

In a letter dated August 23, 2012, the NRMLA submitted comments to the Conference of State Bank Supervisors (CSBS) specifying portions of RMEGs needing amendments.

NRMLA suggested that changes be made in the Guidelines' sections for definitions, examiner checklist (FHA approved entities and all other institutions), reference and glossary of terms, institution and management questionnaire, and reverse mortgage product worksheet and servicing worksheet.

CSBS together with the American Association of Residential Mortgage Regulators (AARMR) published RMEGs in 2008 aimed at setting standards for reviewing the business practices and operations of lenders and brokers selling reverse mortgage loans to seniors. They were updated the following year.

While the RMEGs are not obligatory, they provide consistent measures regulators and lenders can use to determine if appropriate operations and ethical business practices are being carried out by reverse mortgage companies and the workforce.

RMEGs were conceived in 2007 for fear that the reverse mortgage loan industry would suffer the same fate as the residential forward mortgage loan industry as it deals with one seatback after another largely due to the placing of consumers in inappropriate loans.

The CSBS asked NRMLA to submit comments as it reviews and eventually updates and revises the measures specify in RMEGs.Concerns about the malpractices in the industry resurface following the release of Consumer Financial Protection Bureau's (CFPB) report focusing on reverse mortgage disadvantages.

The report stated that few of the American baby boomers understand reverse mortgage products and that deceptive marketing abound in the industry.Though CFPB earned flak for excluding assessments of senior borrowers in the report, the reverse mortgage industry responded positively to the call for across-the-board ethical practices.

Reverse mortgage, particularly the Federal Housing-insured Home Equity Conversion Mortgage (HECM), is viewed as a significant financial planning tool for retirees with home equity, with or without financial assets.

The said trend was boosted by the introduction of HECM Saver in 2010. HECM Saver is the less costly FHA-insured reverse mortgage product alternative to the standard HECM. The upfront premium of 2% in HECM standard is only at .01 percent in HECM Saver. This means that under HECM Saver option, a property worth $150, 000 only costs a senior borrower an upfront premium of $15. Under the HECM standard, the upfront premium will cost $3,000.


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