HUD Discusses Ways to Improve HECM Program's Appeal

NRMLA Mid-Month Report: April 2006

For reverse mortgages to gain wider acceptance among mainstream consumers, the Department of Housing and Urban Development and the reverse mortgage industry must design a new HECM program that appeals to retirees of all ages and income brackets, according to senior HUD officials who addressed NRMLA's Western and Eastern Regional Meetings.

Ben Johnson, Acting Director of the Denver Home Ownership Center, and Engram Lloyd, Director of the Philadelphia Home Ownership Center, said in separate speeches that the HECM program has been viewed by the public as a product of last resort for low-income elderly widows far too long.

To help sustain the program, HUD proposed five reforms: 1) reduce upfront costs; 2) simplify the program by eliminating complex features, such as the servicing fee set-aside; 3) permit HECMs for Home Purchase; 4) increase the number of qualified telephone counselors; and 5) promote HECM as a financial planning tool.

Some of these reforms are already gaining traction. A HECM for Home Purchase option is contained in the FHA modernization bill discussed in the opening story. On the issue of counseling, HUD is planning to eventually issue a mortgagee letter that would establish a nationwide roster of approved HECM counselors and require all individual counselors who offer HECM counseling to pass an exam in order to be included on the roster. The remaining reforms will be discussed in greater detail when the Reverse Mortgage Working Group convenes later this spring.