Reverse Mortgage Compliance Risk Guidelines Will Be Updated, Says OCC

The Office of the Comptroller of Currency (OCC), a division of the U.S. Department of the Treasury, invites input and feedback regarding proposed updates to guidance issued in 2010 regarding compliance risk and reputation management reverse mortgage products. This is according to a notice published by the OCC in the Federal Register in late January.

The guidelines, “Reverse Mortgage Products: Guidance for Managing Compliance and Reputation Risks,” began to gain traction in late 2009 before eventually being adopted by initial publication in the Federal Register in August 2010. After initial publication in the registry, the guidelines came into force. this October and has not changed since.

In their current form, the guidance seeks to “provide adequate information to consumers about reverse mortgage products; to provide qualified independent advice to consumers considering these products; and to avoid potential conflicts of interest.

Efforts underway to update 2010 forecasts

In the Jan. 28 update to the register, the OCC says reverse mortgage guidance updates are underway to “reduce paperwork and guarantor burden, urges the general public and other federal agencies to comment on the renewal of a collection of information” related to the inversion the sharing of information on the mortgage industry with borrowers and the obligation for a potential borrower to receive independent advice before engaging in such ready.

The information gathering that the OCC seeks to accomplish in any new review focuses on five points, according to the registry entry. The first is whether the collection of information “is necessary for the proper performance of the functions of the OCC, including whether the information has a practical use”,

The registry also seeks to verify “the accuracy of the information collection burden estimates, including the validity of the methodology and assumptions used”, while also seeking to find ways in which the “quality, l ‘usefulness and clarity of information’ can be enhanced. Minimizing the burden of collecting information on respondents is also a goal of the new effort, the OCC says, including whether or not it would be prudent to incorporate “the use of automated collection techniques or other forms of information technology,” according to the notice.

Finally, the OCC requests estimates of capital or start-up costs and “costs of operation, maintenance, and purchasing services to provide information,” the notice states. Comments related to this issue will be due to the CCO by March 29th.

The National Reverse Mortgage Lenders Association (NRMLA) is aware of the new notice in the Federal Register and is determining its next course of action according to association president Steve Irwin.

“Yes, we saw this posted and briefly discussed our approach to responding with our executive committee last week,” Irwin told RMD in an email. “We will draft and submit comments by the March 29 deadline, but we are not ready to comment on what those comments will be.”

Read the notice in the Federal Register.

History of Reverse Mortgage Guidelines

In mid-December 2009, the Federal Financial Institutions Examination Board (FFIEC) offered guidance to federal financial institution regulators on managing the compliance and reputational risks presented by reverse mortgage products.

This guidance primarily focused on “the need to provide adequate information to consumers about reverse mortgage products, to provide qualified independent advice to consumers considering such products and to avoid potential conflicts of interest,” the notice states. of the register. He also discussed policies, procedures, internal controls and third party risk management for the reverse mortgage industry.

The advice paid particular attention to the relationship between the industry itself and the requirement for reverse mortgage advice. Institutions offering reverse mortgages, according to the guidelines, require written policies and procedures that prohibit the practice of referring a client to a particular counseling agency and that prohibit a loan originator from contacting a counselor on behalf of the client. .

Policies should also provide clear restrictions on originators of reverse mortgages who do not appear to have conflicts of interest related to the sale or “appear related to the granting of a mortgage”, while also allowing for regular reviews. compensation practices to ensure that originators or brokers are not incentivized to sell particular products or services.

The guidelines also recommended the creation of training materials to ensure that “relevant loan staff are able to convey information to consumers about product conditions and risks in a timely, accurate and balanced manner,” the document states.

The creation of these initial guidelines before the effective date was supported at the time by the Mortgage Bankers Association (MBA), which submitted a letter to the FFIEC in support of the decision.

“MBA supports oversight measures to provide guidance to lenders on consumer protection of reverse mortgages and management of reputational risk,” the February 2010 letter stated. “MBA recognizes that reverse mortgages are products relatively new and complex financial instruments designed to provide assistance to a particularly vulnerable consumer population. For these reasons, MBA believes that all reverse mortgages should come with strong consumer protections.

Read the original Federal Register guidelines.

Recent Reverse Mortgage Advice Issues

The timing of the newly proposed guidelines matches other issues with reverse mortgage counseling in some states. In Massachusetts, reverse mortgage business was effectively halted due to issues with the state’s in-person counseling requirement conflicting with the realities of the COVID-19 coronavirus pandemic, which presents a greater risk high to develop severe disease for the elderly and immunocompromised.

Recently, a new bill was introduced in Governor Charlie Baker’s office that would restore remote support for counseling throughout the summer, and recent indications show the potential for reignited legislative debate that could lead to a more permanent solution to the problem.

A Pennsylvania state official also recently targeted reverse mortgage counseling in a newly proposed bill designed to reduce the “gotchas” of engaging with reverse mortgage products by limiting the counseling process to face-to-face sessions only in the state. , with some exceptions.


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