SPOTLIGHT complex program, which is so important to so many people. At this point in my career, it has been a privilege to have the opportunity to work on a program of this magnitude.
N THE LAST FEW YEARS, HUD n Ihas made significant revisions to the HECM program. What were the goals of this policy overhaul? Do you feel that HUD has been successful in achieving them?
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OW can lenders work with H HUD to help ensure the success of the program?
I think maintaining a positive outlook (in spite of the complexity and numerous changes) is critical. When we see a problem, we need to be realistic about how to resolve it. And when we see opportunities to introduce a change that enhances the program, we need to work together to accomplish it.
HY do you think the product n W is so often misunderstood by consumers and financial professionals?
Because it is complicated! In order to really understand how this program works, you have to get into the details. I think we could develop tools that are more consumer-friendly, easier to read and understand, presenting complexity in pictures if necessary to clarify how the program works. I think it is important for families to be more engaged when
HE PRODUCT has a startlingly n Tlow penetration rate, just about
3 percent of the potential market. What do you think it will take for this to change?
I think continuing to improve the program’s reputation and educating the public on how the program works is critical. Lenders and servicers must be vigilant about how the program is being sold, and provide life-of-loan interaction, communication and support to the borrowers. These are high-touch customers, and because we’re talking about seniors, the headline risk is high. So, it is critical for the industry and HUD to work together to ensure that lenders and servicers are following program guidelines. But it’s equally important that we ensure customers are wellinformed through clear/understandable disclosures, counseling, sales and underwriter communications, and their interactions with servicing staff.
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HAT is your projection for W the program three to five years down the road?
It is hard to imagine that the program won’t grow when you see the increased number of seniors retiring. It will be interesting to see if this program can be more integrated with other tools designed to support seniors and their desire to age in place. We are visited often by representatives from other countries who are exploring ways of supporting aging populations, and this program is viewed by many countries as a very important tool. n
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SPOTLIGHT
The industry has been very supportive. There have been a few rough spots— not unexpected when you think of the complexity of the work and the number of changes that have been made. As we learn more from the data we are now collecting, we will continue to assess the impact of the changes made and determine whether further changes are needed. Having been in the business for a very long time, I have experienced, as a lender, the challenges of dealing with massive changes, market swings, etc. So I do appreciate that the process of operationalizing significant change
ARM loans are now 90 percent of our volume and 62-64 percent of initial draws are 60 percent or less of the principal limit. Draw patterns following the initial disbursement limit are consistent with assumptions that were made in designing the policy. Based on research, we expect to see reduced property charge defaults. It is too early for us to be able to assess performance on the loans that have been originated in just the last year and a half, but we are collecting additional data related to Financial Assessment, servicing and assignment policies, which will enable us to measure the impact of the changes over time. As the industry knows, we are experiencing a decline in volume, but with more public support for the program and the growing senior population, we expect that trend to be temporary.
TITLE TIP
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HOW do you think the industry has adjusted to policy change?
OW have HECM policy H changes impacted the book of business thus far?
TECH
I think we’ve been successful in reducing risk to the MMI Fund; improving public perception of the program; enhancing functionality in our HERMIT system; reducing claims backlogs; and engaging frequently with both originators and servicers. I think one of our most complex accomplishments was to provide new policy on non-borrowing spouses, while the origination and servicing policy changes have certainly enhanced public support for the program.
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seniors are considering a HECM. I also think it would be helpful if consumers had a better understanding upfront about what happens when a borrower dies, along with more communication on how HECMs are serviced.
ORIGINATING
The goals are to ensure that the HECM program is a sustainable solution for the borrower and to manage risk to the MMI Fund; reduce defaults on property charges and other borrower responsibilities under the terms of the loan; ensure that servicing and claims processes are well-defined and enhanced to reduce risk to the fund; and provide clear guidance for servicers.
is challenging, both for us and industry participants.