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To help the growing senior demographic access home equity, some mortgage lenders are looking to add reverse mortgages to their product lineup. Reverse mortgages — typically available to borrowers age 62 and up — allow seniors to convert a portion of their home equity to cash through a payout option selected by the borrower, which may include a lump sum payment, series of monthly payments, line of credit, or a combination thereof. While most reverse mortgage loans are FHA-insured Home Equity Conversion Mortgages (HECMs), some proprietary products allow lenders to expand reverse offerings to borrowers under 62 and offer higher loan amounts.
Over the years, reverse mortgages have been subject to regulatory scrutiny due to the senior population to which they are offered. For example, Consumer Financial Protection Bureau (CFPB) stated in a 2024 consent order with a HECM servicing operation that its servicing failures resulted in “extraordinary and unwarranted anxiety to consumers and caretakers who were naturally worried about elderly and vulnerable consumers being without a place to live.”
This heightened consumer protection element underlies how regulators view reverse mortgage loans and informs related disclosure, counseling, and product considerations. While reverse mortgages are subject to many of the same consumer regulatory requirements at the federal and state level as traditional forward mortgages, there are some unique considerations that lenders entering the space should be aware of. Any discussion of setting up a reverse mortgage program should include the following:
Lenders must have separate federal disclosure documents and processes for reverse loans, since they are not subject to the TILA-RESPA Integrated Disclosure Rules (TRID). Though TRID does not apply, lenders must provide applicable disclosures under the Truth-in-Lending Act (TILA), including a Total Annual Loan Cost (TALC) Disclosure, a reverse-specific disclosure that shows the total expected costs of the loan as annual rate, and how that rate changes depending on how long the borrower has the loan. Disclosures under the Real Estate Settlement Procedures Act (RESPA) include the Good Faith Estimate and HUD-1 Settlement Statement. Counseling also plays a key role in reverse mortgage originations and the processing of an application. HECM lenders and their third-party originators are only able to engage in limited activities prior to a HECM borrower (and, if applicable, any non-borrowing spouse or non-borrowing owner) completing mandatory HECM counseling from a HUD-approved housing counselor.
Reverse mortgage marketing has been heavily scrutinized by the CFPB and other regulators over the years, resulting in a number of consent orders against reverse mortgage lenders.
Those looking to make or broker reverse loans should ensure they hold all required state approvals for reverse lending and consider any state-specific requirements for proprietary loans. Generally, reverse mortgage lending or brokering requires the same state licenses for mortgage lending or brokering as forward mortgage lending. However, there are some states (such as New York) that require a supplementary approval or license for reverse mortgage lending. In addition, certain states have enhanced requirements for lenders offering proprietary products, such as an enhanced net worth requirement for the lender or approval of the proprietary product itself.
FHA Mortgagees must obtain a separate Direct Endorsement (DE) approval for HECMs than for forward mortgages. DE underwriters for HECMs must have expertise in the FHA financial assessment requirements to evaluate a borrower’s ability and willingness to meet financial obligations and comply with mortgage requirements, including determining whether a life expectancy set aside (LESA) will be required for payment of property charges.
Lenders should take note of FHA’s HECM-specific conflict of interest requirements, which prohibits a mortgagee and any other party that participates in the origination of a HECM transaction from participating in, being associated with, or employing any party that participates in or is associated with any other financial or insurance activity unless certain firewalls and safeguards are in place. This provision, along with state anti-tying laws, make it crucial for HECM lenders to understand the risks and limitations of offering any other financial or insurance products with a HECM.
To avoid Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) and Mortgage Acts and Practices (MAP) Rule violations, lenders, and their marketing teams must understand the unique risks and requirements that arise when marketing reverse mortgage products. Reverse mortgage marketing has been heavily scrutinized by the CFPB and other regulators over the years, resulting in a number of consent orders against reverse mortgage lenders. For example, reverse lenders cannot imply that they are affiliated with the federal government, that a consumer will always have the right to stay in their home, or that a borrower will never have to make any payments with a reverse mortgage (since they are still obligated to pay taxes and insurance and maintain the property).
To help the growing senior demographic access home equity, some mortgage lenders are looking to add reverse mortgages to their product lineup. Reverse mortgages — typically available to borrowers age 62 and up — allow seniors to convert a portion of their home equity to cash through a payout option selected by the borrower, which may include a lump sum payment, series of monthly payments, line of credit, or a combination thereof. While most reverse mortgage loans are FHA-insured Home Equity Conversion Mortgages (HECMs), some proprietary products allow lenders to expand reverse offerings to borrowers under 62 and offer higher loan amounts.
Over the years, reverse mortgages have been subject to regulatory scrutiny due to the senior population to which they are offered. For example, Consumer Financial Protection Bureau (CFPB) stated in a 2024 consent order with a HECM servicing operation that its servicing failures resulted in “extraordinary and unwarranted anxiety to consumers and caretakers who were naturally worried about elderly and vulnerable consumers being without a place to live.”
This heightened consumer protection element underlies how regulators view reverse mortgage loans and informs related disclosure, counseling, and product considerations. While reverse mortgages are subject to many of the same consumer regulatory requirements at the federal and state level as traditional forward mortgages, there are some unique considerations that lenders entering the space should be aware of. Any discussion of setting up a reverse mortgage program should include the following:
Lenders must have separate federal disclosure documents and processes for reverse loans, since they are not subject to the TILA-RESPA Integrated Disclosure Rules (TRID). Though TRID does not apply, lenders must provide applicable disclosures under the Truth-in-Lending Act (TILA), including a Total Annual Loan Cost (TALC) Disclosure, a reverse-specific disclosure that shows the total expected costs of the loan as annual rate, and how that rate changes depending on how long the borrower has the loan. Disclosures under the Real Estate Settlement Procedures Act (RESPA) include the Good Faith Estimate and HUD-1 Settlement Statement. Counseling also plays a key role in reverse mortgage originations and the processing of an application. HECM lenders and their third-party originators are only able to engage in limited activities prior to a HECM borrower (and, if applicable, any non-borrowing spouse or non-borrowing owner) completing mandatory HECM counseling from a HUD-approved housing counselor.
Reverse mortgage marketing has been heavily scrutinized by the CFPB and other regulators over the years, resulting in a number of consent orders against reverse mortgage lenders.
Those looking to make or broker reverse loans should ensure they hold all required state approvals for reverse lending and consider any state-specific requirements for proprietary loans. Generally, reverse mortgage lending or brokering requires the same state licenses for mortgage lending or brokering as forward mortgage lending. However, there are some states (such as New York) that require a supplementary approval or license for reverse mortgage lending. In addition, certain states have enhanced requirements for lenders offering proprietary products, such as an enhanced net worth requirement for the lender or approval of the proprietary product itself.
FHA Mortgagees must obtain a separate Direct Endorsement (DE) approval for HECMs than for forward mortgages. DE underwriters for HECMs must have expertise in the FHA financial assessment requirements to evaluate a borrower’s ability and willingness to meet financial obligations and comply with mortgage requirements, including determining whether a life expectancy set aside (LESA) will be required for payment of property charges.
Lenders should take note of FHA’s HECM-specific conflict of interest requirements, which prohibits a mortgagee and any other party that participates in the origination of a HECM transaction from participating in, being associated with, or employing any party that participates in or is associated with any other financial or insurance activity unless certain firewalls and safeguards are in place. This provision, along with state anti-tying laws, make it crucial for HECM lenders to understand the risks and limitations of offering any other financial or insurance products with a HECM.
To avoid Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) and Mortgage Acts and Practices (MAP) Rule violations, lenders, and their marketing teams must understand the unique risks and requirements that arise when marketing reverse mortgage products. Reverse mortgage marketing has been heavily scrutinized by the CFPB and other regulators over the years, resulting in a number of consent orders against reverse mortgage lenders. For example, reverse lenders cannot imply that they are affiliated with the federal government, that a consumer will always have the right to stay in their home, or that a borrower will never have to make any payments with a reverse mortgage (since they are still obligated to pay taxes and insurance and maintain the property).
To help the growing senior demographic access home equity, some mortgage lenders are looking to add reverse mortgages to their product lineup. Reverse mortgages — typically available to borrowers age 62 and up — allow seniors to convert a portion of their home equity to cash through a payout option selected by the borrower, which may include a lump sum payment, series of monthly payments, line of credit, or a combination thereof. While most reverse mortgage loans are FHA-insured Home Equity Conversion Mortgages (HECMs), some proprietary products allow lenders to expand reverse offerings to borrowers under 62 and offer higher loan amounts.
Over the years, reverse mortgages have been subject to regulatory scrutiny due to the senior population to which they are offered. For example, Consumer Financial Protection Bureau (CFPB) stated in a 2024 consent order with a HECM servicing operation that its servicing failures resulted in “extraordinary and unwarranted anxiety to consumers and caretakers who were naturally worried about elderly and vulnerable consumers being without a place to live.”
This heightened consumer protection element underlies how regulators view reverse mortgage loans and informs related disclosure, counseling, and product considerations. While reverse mortgages are subject to many of the same consumer regulatory requirements at the federal and state level as traditional forward mortgages, there are some unique considerations that lenders entering the space should be aware of. Any discussion of setting up a reverse mortgage program should include the following:
Lenders must have separate federal disclosure documents and processes for reverse loans, since they are not subject to the TILA-RESPA Integrated Disclosure Rules (TRID). Though TRID does not apply, lenders must provide applicable disclosures under the Truth-in-Lending Act (TILA), including a Total Annual Loan Cost (TALC) Disclosure, a reverse-specific disclosure that shows the total expected costs of the loan as annual rate, and how that rate changes depending on how long the borrower has the loan. Disclosures under the Real Estate Settlement Procedures Act (RESPA) include the Good Faith Estimate and HUD-1 Settlement Statement. Counseling also plays a key role in reverse mortgage originations and the processing of an application. HECM lenders and their third-party originators are only able to engage in limited activities prior to a HECM borrower (and, if applicable, any non-borrowing spouse or non-borrowing owner) completing mandatory HECM counseling from a HUD-approved housing counselor.
Reverse mortgage marketing has been heavily scrutinized by the CFPB and other regulators over the years, resulting in a number of consent orders against reverse mortgage lenders.
Those looking to make or broker reverse loans should ensure they hold all required state approvals for reverse lending and consider any state-specific requirements for proprietary loans. Generally, reverse mortgage lending or brokering requires the same state licenses for mortgage lending or brokering as forward mortgage lending. However, there are some states (such as New York) that require a supplementary approval or license for reverse mortgage lending. In addition, certain states have enhanced requirements for lenders offering proprietary products, such as an enhanced net worth requirement for the lender or approval of the proprietary product itself.
FHA Mortgagees must obtain a separate Direct Endorsement (DE) approval for HECMs than for forward mortgages. DE underwriters for HECMs must have expertise in the FHA financial assessment requirements to evaluate a borrower’s ability and willingness to meet financial obligations and comply with mortgage requirements, including determining whether a life expectancy set aside (LESA) will be required for payment of property charges.
Lenders should take note of FHA’s HECM-specific conflict of interest requirements, which prohibits a mortgagee and any other party that participates in the origination of a HECM transaction from participating in, being associated with, or employing any party that participates in or is associated with any other financial or insurance activity unless certain firewalls and safeguards are in place. This provision, along with state anti-tying laws, make it crucial for HECM lenders to understand the risks and limitations of offering any other financial or insurance products with a HECM.
To avoid Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) and Mortgage Acts and Practices (MAP) Rule violations, lenders, and their marketing teams must understand the unique risks and requirements that arise when marketing reverse mortgage products. Reverse mortgage marketing has been heavily scrutinized by the CFPB and other regulators over the years, resulting in a number of consent orders against reverse mortgage lenders. For example, reverse lenders cannot imply that they are affiliated with the federal government, that a consumer will always have the right to stay in their home, or that a borrower will never have to make any payments with a reverse mortgage (since they are still obligated to pay taxes and insurance and maintain the property).
To help the growing senior demographic access home equity, some mortgage lenders are looking to add reverse mortgages to their product lineup. Reverse mortgages — typically available to borrowers age 62 and up — allow seniors to convert a portion of their home equity to cash through a payout option selected by the borrower, which may include a lump sum payment, series of monthly payments, line of credit, or a combination thereof. While most reverse mortgage loans are FHA-insured Home Equity Conversion Mortgages (HECMs), some proprietary products allow lenders to expand reverse offerings to borrowers under 62 and offer higher loan amounts.
Over the years, reverse mortgages have been subject to regulatory scrutiny due to the senior population to which they are offered. For example, Consumer Financial Protection Bureau (CFPB) stated in a 2024 consent order with a HECM servicing operation that its servicing failures resulted in “extraordinary and unwarranted anxiety to consumers and caretakers who were naturally worried about elderly and vulnerable consumers being without a place to live.”
This heightened consumer protection element underlies how regulators view reverse mortgage loans and informs related disclosure, counseling, and product considerations. While reverse mortgages are subject to many of the same consumer regulatory requirements at the federal and state level as traditional forward mortgages, there are some unique considerations that lenders entering the space should be aware of. Any discussion of setting up a reverse mortgage program should include the following:
Lenders must have separate federal disclosure documents and processes for reverse loans, since they are not subject to the TILA-RESPA Integrated Disclosure Rules (TRID). Though TRID does not apply, lenders must provide applicable disclosures under the Truth-in-Lending Act (TILA), including a Total Annual Loan Cost (TALC) Disclosure, a reverse-specific disclosure that shows the total expected costs of the loan as annual rate, and how that rate changes depending on how long the borrower has the loan. Disclosures under the Real Estate Settlement Procedures Act (RESPA) include the Good Faith Estimate and HUD-1 Settlement Statement. Counseling also plays a key role in reverse mortgage originations and the processing of an application. HECM lenders and their third-party originators are only able to engage in limited activities prior to a HECM borrower (and, if applicable, any non-borrowing spouse or non-borrowing owner) completing mandatory HECM counseling from a HUD-approved housing counselor.
Reverse mortgage marketing has been heavily scrutinized by the CFPB and other regulators over the years, resulting in a number of consent orders against reverse mortgage lenders.
Those looking to make or broker reverse loans should ensure they hold all required state approvals for reverse lending and consider any state-specific requirements for proprietary loans. Generally, reverse mortgage lending or brokering requires the same state licenses for mortgage lending or brokering as forward mortgage lending. However, there are some states (such as New York) that require a supplementary approval or license for reverse mortgage lending. In addition, certain states have enhanced requirements for lenders offering proprietary products, such as an enhanced net worth requirement for the lender or approval of the proprietary product itself.
FHA Mortgagees must obtain a separate Direct Endorsement (DE) approval for HECMs than for forward mortgages. DE underwriters for HECMs must have expertise in the FHA financial assessment requirements to evaluate a borrower’s ability and willingness to meet financial obligations and comply with mortgage requirements, including determining whether a life expectancy set aside (LESA) will be required for payment of property charges.
Lenders should take note of FHA’s HECM-specific conflict of interest requirements, which prohibits a mortgagee and any other party that participates in the origination of a HECM transaction from participating in, being associated with, or employing any party that participates in or is associated with any other financial or insurance activity unless certain firewalls and safeguards are in place. This provision, along with state anti-tying laws, make it crucial for HECM lenders to understand the risks and limitations of offering any other financial or insurance products with a HECM.
To avoid Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) and Mortgage Acts and Practices (MAP) Rule violations, lenders, and their marketing teams must understand the unique risks and requirements that arise when marketing reverse mortgage products. Reverse mortgage marketing has been heavily scrutinized by the CFPB and other regulators over the years, resulting in a number of consent orders against reverse mortgage lenders. For example, reverse lenders cannot imply that they are affiliated with the federal government, that a consumer will always have the right to stay in their home, or that a borrower will never have to make any payments with a reverse mortgage (since they are still obligated to pay taxes and insurance and maintain the property).
MaxClass is a woman-owned company, and we're offering MWLC members 65% off your continuing education when you use our code WOMENWIN.
MaxClass is a woman-owned company, and we're offering MWLC members 65% off your continuing education. Become a member for our unique code.
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MaxClass is a woman-owned company, and we're offering MWLC members 65% off your continuing education when you use our code WOMENWIN.
MaxClass is a woman-owned company, and we're offering MWLC members 65% off your continuing education. Become a member for our unique code.
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