Good for my mother: FHA Chief Brian Montgomery on reverse mortgages (Part II)Atare E. Agbamu, CRMSHome Equity Conversion Mortgages, HUD, RESPA
FHA boss Brian D. Montgomery, actors James Garner and Robert
Wagner share a common passion: They are rev-angelists. What is that
you may ask? Rev-angelists are those who passionately share their
belief in the value that Home Equity Conversion Mortgages (HECMs)
and reverse mortgages offer many older adults.
Although it is a small but growing part of the more than $400
billion insurance business he runs for the federal government,
Commissioner Montgomery thinks the world of HECMs and reverse
mortgages. So strong is his passion for these exceptional home
loans that he has brought his own mother around to appreciate them.
This fascinating mother-son (Montgomery family reverse mortgage
education) story is recounted here in print for the first time. We
might draw some lessons from it as we go about advising and
educating America's seniors.
A former Deputy Assistant to the President and Cabinet Secretary
(2003-2005), Commissioner Montgomery's other responsibilities at HUD since June 2005 includes
overseeing RESPA regulation, the housing mission of Fannie Mae and Freddie Mac, and the
manufactured housing industry.
The genial and imposing Texan has made reform and modernization
a personal mission since coming to the FHA. Sweeping regulatory
changes involving repairs, appraisals, counseling, and others have
been implemented, making FHA-insured loans (including reverse
mortgages) more consumer-friendly. The changes have also made
government-insured home loans more competitive with conventional
mortgages. It is a new day at FHA under Commissioner
On Dec. 14, 2007, the Senate approved the FHA Reform and
Modernization Bill (SB 2338) by a vote of 93 to 1. The House
overwhelmingly passed a similar bill in September. The goal of
bringing FHA lending into the 21st Century is in sight.
Among other radical changes, the SB 2338 addresses significant
HECM and reverse mortgage industry issues, including the removal of
a HECM volume cap, single national loan limit, holding the HECM
origination fee to 1.5 percent of FHA's maximum claim amount, and
authorizing HECM for home purchases. I spoke with Mr. Montgomery
recently. The following is part two of a transcript of our
Atare E. Agbamu: I understand that you have recommended
a reverse mortgage to your own mother.
Brian D. Montgomery: Yes, I have.
AEA: Wow! That is a huge sign of confidence!
BDM: I will tell you the story, only because I think it is
a funny story.
AEA: Please, go ahead!
BDM: I was having a discussion with my mom about this
product [reverse mortgages]. It's probably been a year or so. She
was a little familiar with it by virtue of some of the ads you've
seen on TV with James Garner, Pat Boone and Robert Wagner.
And I said, "Mom, you ought to really think about this product. I
know a lot about it."
So, she said, "Okay."
Two weeks later, we were talking about something else, and I said,
"So, Mom, what do you think about [the] reverse mortgage
She paused and said, "Well, I don't know."
And I said, "You don't know?"
She said, "Well, I just think it is too risky."
So, I said, "Mom, I have two comments to that: First and foremost,
of course, I'm your son. I'll make sure whatever you do, in your
world, in your finances, is in your best long-term interest."
Then I said, "Secondly, I am in charge of this program for the
United States government. I don't think you need to worry that I'd
steer you toward something that I didn't think was in your best
She laughed and said, "Okay, I guess you're right."
Even though we still haven't done it yet, my point in that is if I,
as the FHA Commissioner, am having a difficult time advising and
educating my own mother on it, and I run the program for the
government, I can only imagine some of the difficulties others are
having out there.
AEA: That is a beautiful story! We can all learn from
it! Many baby boomers will be having this Montgomery-type
conversation about reverse mortgages with their parents or
grandparents in the months ahead. It is worth re-telling. When you
become eligible for reverse mortgages some day, would you consider
a HECM loan?
BDM: Oh, absolutely! I'd consider it. It is hard for me to
look into my crystal ball and see what the world would look like,
especially as it relates to the Montgomery family. But certainly, I
would have no hesitation on the HECM product or reverse mortgages
in general. It is a wonderful product.
AEA: Your tenure at FHA will be remembered for many
significant accomplishments. Most importantly, it will be known for
FHA reform and modernization. How will FHA reform improve the HECM
program for America's seniors?
BDM: Looking forward, I think eliminating the cap [volume
cap is currently at $275,000 for HECM loans] would be very helpful
because it signals to lenders who are using the program that 'this
is going to be around for a while.' That then allows them to invest
money in the technology they need. It allows them to invest money
in the human resources that they need. Ultimately, that makes them
more efficient. It makes the products less expensive, thus
benefiting more seniors.
AEA: How do you think it will impact reverse mortgage
lenders, correspondents and others? There are still a lot of
community banks that are not offering HECMs and reverse mortgages.
Community banks probably serve a lot of seniors. Getting them
excited about HECMs and reverse mortgages would be a good thing.
What do you think?
BDM: Absolutely! I get back to my point about consumer
awareness and awareness of the industry. The best thing about this
program is that it speaks for itself. It has been a wonderful
success story. I think as more people and financial institutions
find out about it, whether they are banks, community banks or
others, they would want to be able to offer their customers a suite
of products. And I think it will just be a natural move for them
(making the reverse mortgage a part of that), something else they
can offer their customers.
AEA: After your tenure at HUD, should you decide to take
a job in mortgage lending or come in as an investor, where would
you like to come in?
BDM: That is a very good question, Atare. I haven't given
much thought to my post-HUD employment. I still have a lot of work
to do in the 13 or 14 months that I will be a part of this
administration. I will do what I can during that time, as I think I
have done all along, to make the product better for seniors, [and]
to make it easier for the industry so that they feel comfortable
that the product will be around for a while, so that they can
invest in people and technology and reduce costs for seniors. You
can ask me this question in a year. How does that sound?
AEA: Okay, we'll get there. Thank you very much, Mr.
Montgomery. Do you have any closing thoughts for us?
BDM: I appreciate the opportunity to talk about this
product. It is a wonderful product. There are some fantastic people
out in the industry who I think are doing a great job educating the
public. And again, I would say Peter Bell [NRMLA president], National Reverse Mortgage
Lenders Association, all the wonderful spokespersons of some of
the proprietary products, those who offer the FHA products and
certainly AARP [are the ones
that] look out for the best interest of their constituents. We
appreciate their help as well.
AEA: Thank you very much, Mr. Montgomery.
Atare E. Agbamu, CRMS, formed ThinkReverse LLC, to help
originators address demographic change via reverse mortgages. A
specialist with Credo
Mortgage, a member of the BusinessWeek Market Advisory
Board, Atare is the first to propose reverse mortgages as risk
management tools for forward originators. Besides marketing,
originating and researching reverse mortgages since 2001, Atare has
authored more than 90 articles and a book on reverse mortgages. He
may be reached by phone at (612) 203-9434 or e-mail [email protected]