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Residential Department: Q&A: Peter Bell, National Reverse Mortgage Lenders Association: February 2012


Q&A: Peter Bell, National Reverse Mortgage Lenders Association

Peter Bell, president and CEO, National Reverse Mortgage Lenders Association

The reverse-mortgage market is a growing niche. In just 10 years, the number of home equity conversion mortgages (HECMs) endorsed by the Federal Housing Administration (FHA) has gone from about 7,000 mortgages in 2001 to more than 70,000 mortgages in fiscal year 2011. Peter Bell, president and CEO of the National Reverse Mortgage Lenders Association (NRMLA), tells us what challenges the industry faces this year. 

How would you describe the current state of the reverse-mortgage market?

It’s a challenge to work with a product that is a growing-balance mortgage against a declining-value asset. Volume has contracted recently as a result of diminished home values and investors leaving the proprietary market. The combination of demographic trends as well as the wealth profile of households points to a very bright future for the reverse-mortgage industry, however. There are challenges to that from some consumer distrust of the product. Some of it stems from negative reporting in the media, and some of it comes from a lack of understanding of how reverse-mortgage products work. 

What are you keeping an eye on this year?

The Consumer Financial Protection Bureau is required to produce a study of the reverse-mortgage market and turn that over to Congress in July. FHA is continually assessing the performance of the HECM program and will probably put out a proposed rule to add in a layer of financial assessment and underwriting for prospective HECM borrowers. 

Why is this rule change being proposed? 

We’ve been doing HECMs for 20 years now, and there are some people who get a HECM and then ultimately find that they don’t have the means to meet their obligations. Once upon a time, a reverse mortgage was written just on the value of the property and the age of the borrower because there are no payments. But there still needs to be sufficient cash flow within the household to be able to pay taxes and insurance and meet all day-to-day needs. FHA will come out with a proposed rule probably sometime in the second quarter, and then the final rule will come out later in the year. In the meantime, some companies have begun to add in an assessment of this sort, so NRMLA put out guidelines this past October so [lenders] would have some ideas to work with.

What will reverse-mortgage volume look like this year?

There’s continued decline in property values in most markets, but once prices stabilize and begin an upward trend, we’ll see a pick up. In October 2010, FHA introduced a new version of the HECM that they call the HECM Saver, which has a much lower upfront mortgage insurance premium in exchange for a slightly lower payout. Borrowers get 10 to 18 percent less, but to people who need less money or who are using it just as a standby reserve, it makes the product much more attractive. We expect to see a lot of growth in that area.


Jennifer Garrett was an editor at Scotsman Guide. For questions on this article, call (800) 297-6061 or e-mail

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