Ethical Practices are the Backbone of Any Business
More rules and regulations are coming into effect this year, this time via the Consumer Financial Protection Bureau, effectively creating a safer, more ethical atmopshere for consumers.
The new rules won't effect reverse mortgages directly, according to an article published in Reverse Mortgage Daily, and will be focused on retail loan originators instead of wholesale loan originators.
A recent National Reverse Mortgage Lenders Association webinar, however, noted that loan originator compensation will affect how loan transactions are done, especially among fixed rate reverse mortgages. Fixed rate HECM loans have become a minority though, since the elimination of the fixed rate standard on July 1. The only fixed rate product available under the reverse mortgage product is the HECM Saver loan.
The new rules will implemented to prevent another Castle & Cooke scandal from happening, where a Utah lender persuaded borrowers to take out mortgage loans with high interest rates and then compensated its loan originators with bonuses based on the loans' interest rates. The Federal Reserve's loan officer compensation rule, however, bans compensation based on the terms of originated loans such as interest rates. THE CFPB estimates that around 150 loan officers were paid quarterly bonuses ranging from $6, 100 to $8,700 since 2011.
Legal counsel Jim Milano of Weiner Brodsky Kider PC, said:
“It looks like the bureau’s going to be out there actively looking at these things. [...]it would be prudent for companies to review comp plans and make sure they are up to speed.”
At PS Financial Services, a reverse mortgage company in Florida, we work with our clients in order to find the best product that works for them. We offer wholesale prices, not retail, as well as adjustable-rate reverse mortgages, which ensure that your experience will be satisfactory.
While we believe in the HECM Saver, and it's ability to make retire comfortable for older Americans, we do not pressure our clients on one product or the other. Our job isn't to pitch one loan over the other but to find the lender that works best for you.
New reverse mortgage regulations are being implemented to make sure the program continue to run as smoothly as possible. It is your chance to take advantage of this product, which has helped many retirees in the past.
"There's likely to more [rules] against cross selling, more counseling requirements and more rules around advertising. Some may not want to be in this business because it's costly to comply..."
The unethical practices of some companies are troubling but this new rules will be effective in weeding out lenders and loan originators who sell consumer impractical loans at unnecessarily high interest rates.
Ethical practices are the backbone of any honest worker, you just have to decide which side you are on before it causes irreparable damage.
Click here for more information about the elimination of the reverse mortgage program as we know it: