TheMReport

18 | TH E M REP O RT FEATURE some of the HUD rules to protect the spouses of deceased borrowers. Hence, the new HUD ruling that went into effect on August 4 regarding surviving spouses was created. Changes in HUD regulations ensure better consumer protection S cott Norman, National Retail Sales Manager for Urban Financial of America, feels that these two new rules represent a conscientious step forward. "I applaud HUD for the due diligence they've done," he said. "Anything we can do to protect the consumer is a win-win for everyone." He said that the situations cor- rected by the first rule are not seen on a regular basis in the reverse mortgage industry, but that it has happened often enough that something needed to change. "This will prevent someone from having to leave their home if a spouse dies," he said. "It's stressful enough to lose a spouse without having to lose your home as well." The second rule has not changed the requirements of reverse mortgages by much, Norman says. "It simply low- ers the loan-to-value for those younger than 62," he explained. "Reverse mortgages were never intended to be available to bor- rowers in their 50s." Nevertheless, he doesn't think borrowers will get a significantly smaller loan amount because of the age of the youngest spouse. "It depends on the actuaries," he said. Another HUD rule coming up shortly will introduce a new financial assessment process to further ensure that reverse mort- gage borrowers have the means to pay their property taxes and insurance to avoid defaulting on the loan. "HUD and Congress get credit for that," Norman said, "and this is something that was really needed and will continue to strengthen the program." After this rule goes into effect, Norman said he believes there will be a significant change in the public's attitude towards reverse mortgages. "Financial planners and CPAs will recognize the true benefits of reverse mortgages, which will produce a spike in the industry next year," he predicted. Many people are beginning to recognize the value of reverse mortgages, according to Norman. "In its last session, the Texas leg- islature voted 170-1 to strengthen and expand reverse mortgages," he explained. He believes the members of the legislature have realized what a great retirement tool reverse mortgages represent. Changes seen as improvement for the product T eague McGrath, chief mar- keting officer for AAG, says that the new HUD rules that go are an important step in helping people have more confidence in the reverse mortgage program. "We welcome the changes," he said, "because this will help to improve the product and also get rid of any misconceptions about reverse mortgages. We want this to happen." McGrath believes from a busi- ness perspective, on the front end, that marketing costs will go up because of the increased cost of qualifying leads. "We will have to qualify the youngest borrower to be included on the title," he said. "Nevertheless, we will make it up on the back end because more people will apply now that spouses will be protected." The real value of a reverse mortgage is that there are mul- tiple ways to benefit from this, McGrath explained. "The reverse mortgage is becoming much more a part of financial planning for seniors who are looking for secu- rity," he said. "They can use this as a cushion to allow other assets to appreciate," he continued. "It also provides security for things they don't expect to happen such as a medical emergency." Another benefit McGrath mentioned is that by using the cash derived from a reverse mort- gage, seniors can delay tapping into their social security benefits for awhile, thereby drawing an increased amount when they do begin using that benefit. Overall, McGrath is pleased with the new rules and expects good things for both the reverse mortgage indus- try and seniors as a result. Joining Forces O btaining the legislative authority to make needed changes in the Home Equity Conversion Mortgage (HECM) program was a joint effort of HUD and the National Reverse Mortgage Lenders Association (NRMLA). This seems to be a good example of what can be achieved with public and private sector collaboration. In addition, the passage of The Reverse Mortgage Stabilization Act of 2013 received bipartisan support in both houses of Congress. Representative Mike Fitzpatrick (R-Pennsylvania) and Representative Denny Heck (D-Washington), drafted the bipartisan Reverse Mortgage Stabilization Act which passed by unanimous consent in the House in June 2013. Senator Robert Menendez (D-New Jersey) and Senator Mike Crapo (R-Idaho) were instrumental in getting the bill passed through the Senate in late July 2013, which was signed by the President in early August of that year. Peter Bell, president and CEO of NRMLA said, "We appreciate HUD making sensible reforms to improve the HECM program and strengthen the insurance fund. This will enable us to help qualified retirees plan for finan- cial security with the help of a reverse mortgage." He pointed out that Americans 62 years and older now have more equity in their homes than at any time since mid-2008. Because of this, he ex- plained that a reverse mortgage through HECM allows home- owners to use the equity in their homes to avoid selling assets such as stocks and mutual funds, thereby allowing those assets to continue to grow and generate dividends. In addition to the new changes, other recent HUD changes include limitations on upfront draws, which is aimed at prolonging the life of borrower assets, and financial assessment, which will confirm whether bor- rowers have the means to fulfill their financial obligations to pay for property taxes and homeown- ers' insurance. "The reverse mortgage is becoming much more a part of financial planning for seniors who are looking for security. . ." —Teague McGrath, AAG

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