The outcome of HECM policy bloodletting over the last six years calls for celebration. That is why the absence of singing and dancing and partying in the HECM industry is puzzling. What would it take to bring some joy about HECMs back into the business? Joy from issuing the safest reverse mortgages in the world, the “gold standard,” as HUD’s Edward J. Szymanoski—my friend and a key architect of the HECM 27 years ago—calls them. Joy from selling a credit product that gives older consumers the opposing values of borrowed cash and peace of mind, assuming they pay their taxes and insurance. And joy from knowing that a major financial and reputation headache, the displacement crisis of surviving non-borrowing spouses, is behind us.
The crisis had taken HECM’s reputation hostage since the litigation in 2011. It ended with FHA Chief Edward L. Golding’s decision to grant lenders access to a special assignment for loans with surviving non-borrowing spouses. For an issue that had overpowered other FHA bosses, Mortgagee Letter 2015-15 was a milestone for the industry. Many spouses who feared displacement are now rejoicing. We should rejoice with them because it is the industry’s victory too.
Mary Blevins of Cedar Hill, Texas, is one of the spouses. For years she lived in terror of displacement from the home she has shared with her husband for almost 30 years. In part, here is her reaction to ML2015-15 in an email:
“I so dreaded the thought of losing my husband and home at the same time. Truthfully, I think I would have been a total basket case. Now I feel like I can face widowhood with dignity instead of desperation. I can live here in my house while I adjust, and I can make decisions without the stress of a looming foreclosure.”
The policy letter averted looming financial and reputation crises for lenders and the HECM industry. Without access to the Mortgagee Optional Election (MOE) assignment, lenders could have been forced to kick many seniors out of their homes. That could have triggered many costly legal battles and related horror stories in the media and in social media. Now, the story is one of joy and hope, it’s about lenders helping spouses stay in their homes.
It is a compassionate story to tell, and we can borrow Blevins’ potent phrasing: “Widowhood with dignity instead of desperation,” or we can mint new ones such as: “HECM with dignity, age with HECM.” For champions of “extreme” industry rebranding, these phrases could be employed in a fresh strategic communication initiative, which should highlight the new HECM safeguards, including Financial Assessment, while stressing the importance of tax and insurance payments to protect your loan.
Let’s celebrate plaintiff and defense attorneys in the NBS litigation for their dogged four-year-plus courtroom combat. Out of their principled struggle for their clients, out of hundreds of pages of motions and counter motions, memoranda, opinions and rulings, has emerged a HECM that is as good as gold in the evolving world of home equity conversion lending.
Non-recourse, an essential HECM feature that was made conditional by rescinded Mortgagee Letter 2008-38 before the litigation, is no longer in doubt. Non-borrowing spouses, originally written out of the HECM and left unprotected from displacement for more than 25 years, have been grafted in, priced in and shielded from late-life displacement when borrowing spouses die. These are critical structural changes that have made the HECM the undisputed gold standard among reverse mortgages.
Let’s celebrate “HECM with dignity!”