The National Reverse Mortgage Lenders Association (NRMLA) has asked a federal regulator to craft a ‘qualified mortgage’ (QM) rule specifically for private reverse mortgages.
Such a QM rule would spell out the characteristics of reverse mortgages that could be originated and securitized without a risk retention requirement, NRMLA president and chief executive Peter Bell told a House panel Wednesday afternoon.
“This will help bring back the proprietary reverse mortgage market, taking some of the burden off Federal Housing Administration (FHA) in serving senior needs,” Bell testified.
Lenders mostly originate FHA-insured reserve mortgages known HECMs (home equity conversion mortgages) today, which are exempt from risk retention.
Prior to the financial crisis, nearly $1 billion in conventional reverse mortgages were securitized in 2007.
The NRMLA is urging the Consumer Financial Protection Bureau (CFPB) to classify any reverse mortgage that meets the guidelines of the FHA HECM program as a qualified mortgage.
The CFPB is currently drafting a final QM rule for forward mortgages that will spell out the underwriting and fee requirements lenders must comply with to be shielded from litigation. Loans that meet the QM requirements likely will be exempt from risk retention under a separate “qualified residential mortgage” rule that is being drafted by six other regulatory agencies.
Charles Coulter, the deputy assistant secretary for the FHA single-family program, testified that HECM originations have been declining since 2009 due to increases in insurance premiums and reductions in the amount of equity take-out available to the borrower.
However, the HECM program is “actuarial sound,” Coulter said.
FHA endorsed 73,000 HECMs in FY 2011, compared to 115,000 HECMS in FY 2009.
During the first-half of FY 2012 (which ended March 31), FHA endorsed 29,000 HECMs, down 26% from the same prior in FY 2011.
Coulter noted the private reverse mortgage programs presently serve just 2% of the reverse mortgage market. These private programs are “generally geared toward the jumbo market where FHA loans are not available,” Coulter said. The loan limit on FHA-insured reverse mortgages is $625,500