Following is a Letter to the Editor submitted by NRMLA to The Wall Street Journal yesterday in response to the publication of the June 8th article, “OCCs Dugan: Reverse Mortgages Could Pose Risks.” NRMLA President Peter Bell met this week with Comptroller Dugan's staff to discuss their participation at next week's policy conference and to answer questions they had about reverse mortgages. Additional meetings will follow.

To the Editor,

In an article in the June 8th edition of the Wall Street Journal headlined, “OCCs Dugan: Reverse Mortgages Could Pose Risks,” reporter Michael R. Crittenden quoted John Dugan, the Comptroller of the Currency, as saying, “Consumer compliance risks with reverse mortgages are real and, indeed, I am struck by some of the similarities to the risks of subprime mortgages.” Though Dugan went on to advocate the importance and growth of the reverse mortgage product in an otherwise thoughtful 12 page speech about regulations needed to make the product work better, Crittenden, in a few paragraphs, focused exclusively on phrases chosen to compare the reverse mortgage to the subprime loan and wrote, “Lenders could be tempted to aggressively market ancillary products in order to gin up more fees and profits from homeowners.”

The comparison of a reverse mortgage to a subprime is onerous and inaccurate. The only thing the two products share is the word “mortgage.” Reverse Mortgages have multiple layers of protections for consumers that subprime loans do not have and that are mandated by HUD, federal and state regulators and industry associations such as ours.

These include:

• mandatory counseling by HUD approved counselors following a HUD-issued protocol;
• mandated FHA insurance that protects the borrower from ever having to pay back more than they were loaned even if the value of their home decreases at the time of the sale;
• restrictions on cross selling of other financial products;
• limitations on the origination fees.

In addition, members of the National Reverse Mortgage Lenders Association (who in 2008 closed over 80% of the reverse mortgages across the country) are required to sign a Code of Ethics and Professional Responsibility. Our Compliance Committee meets as needed to review complaints and suspends members who violate the code. We have now created a Certified Reverse Mortgage Professional designation that requires applicants to sit through an Ethics training course, participate in continued education classes and pass a rigorous exam.

We also are in the midst of an aggressive effort to measure the extent of fraud, misinformation and senior abuse within our industry. We have contacted attorneys general in a dozen states and both state and federal regulators. Thus far we have found one complaint that is being investigated in Michigan. At a recent Federal Reserve hearing in Kansas City, the heads of the consumer complaint offices of the Federal Reserve, OCC, OTC and FDIC all reported that they have received no complaints from seniors . The Conference of State Bank Supervisors reports they receive minimal complaints. The spokesperson for the Inspector General at HUD reports they do not keep a record of complaints. On our association’s complaint line, we have received only a few calls from seniors in the past few years, usually dealing with cross selling and before that was regulated.

On the other hand, an AARP survey reported that 93% of the seniors they polled were happy with their reverse mortgages. And one of our bank members that is consistently among the largest lenders in the country reports their surveys show 95% of their borrowers are content with their reverse mortgages.

In general, we find that the vast majority of warnings about reverse mortgages are based on the history of subprime mortgages and incidents of senior abuse in America that are not tied to the actions or practices of professionals in the reverse mortgage industry. That said, we will continue to work closely with Comptroller Dugan and the OCC and all government regulators to try to refine and improve the product and the way it is sold.

Sincerely,
Peter Bell
President
National Reverse Mortgage Lenders Association
Washington, DC.