Reverse Mortgage Industry Encouraged by New HECM Maintenance Agreement
Last week, reverse mortgage subservicer Celink announced that it had been awarded the Single Family Secretary-Held Home Equity Conversion Mortgage (HECM) Assets contract and bid by the Federal Housing Administration (FHA). takes over the credit management for FHA-sponsored HECM reverse mortgage loans. For any future HECM loans allocated to HUD once they reach 98% of the Maximum Claimed Amount (MCA), Celink will assume the obligations of servicing those loans.
HUD has been trying to select a new HECM service company since at least 2020 — during the previous term — but maintenance issues have long been one of the most discussed pain points among participants in the reverse mortgage industry. Borrowers are also frustrated with servicing, according to data from the Consumer Financial Protection Bureau’s (CFPB) Consumer Complaint Database.
The immediate industry reactions to the news were positive. Talks between industry participants and RMD were upbeat, with some lenders and other industry participants sharing their direct views on the news.
Lenders’ reactions to the news
Leading reverse mortgage lender Finance of America Reverse (FAR) said she was pleased with the news and congratulated Celink on the award, according to lender President Kristen Sieffert.
“Finance of America Reverse congratulates Celink on this important partnership for HECM service,” Sieffert told RMD. “Providing a positive service experience for all of our borrowers remains a core aspect of FAR’s mission, as does our commitment to support and stand by customers and their families throughout the life of the loan. We are pleased that others in the industry are working hard to provide customers with life-changing products and continue to improve the borrower experience from start to finish.”
Longbridge Financial CEO Chris Mayer acknowledged the service difficulties the industry has had in the past and his optimism about the new deal.
“We are very excited for our partners at Celink and for the reverse mortgage industry to adopt the HUD contract,” Mayer said. “One of the challenges facing our industry and the FHA is that once the FHA takes over servicing, the borrower experience degrades. With Celink taking over the service, there is a big opportunity for improvement.”
Adding to Longbridge’s optimism is Richard Burke, the lender’s service director.
“We are very pleased to learn that Celink has received the HUD order,” Burke told RMD. “I think this is a great opportunity for Celink to make any necessary process improvements to make the assignment process a much smoother transition for customers. Celink understands the barriers to getting credit for its customers and can use that knowledge to make the whole process the best possible experience for all customers.”
Also encouraged by the news is Kim Yowell, EVP of Servicing at Fairway Independent Mortgage Corporation.
“Celink is an excellent choice and I am excited about this growth opportunity for Celink – a company with a long and exclusive commitment to the reverse mortgage business and providing excellent services to private homeowners,” she said.
According to Dan Hultquist, National Reverse Mortgage Sales Training Director at Fairway, the persistence of maintenance issues is a problem that has needed to be addressed for some time.
“Proper maintenance is vital to the health of the reverse mortgage industry,” he says. “Unfortunately, poor HUD maintenance has been a major headwind for our sales team. Consider that over 20% of CFPB reverse mortgage complaints in 2021 were directly related to HUD’s service company. Awarding the HUD maintenance contract to Celink could be the most significant change in the industry since protecting non-borrowing spouses in 2014. Not only is this a way to fix losses in the backend, but also to start fixing damage to the product’s reputation.”
Hultquist also shared a recent interaction with an affected reverse mortgage borrower.
“Yesterday I was on the phone with a gentleman who had just lost his wife and has had trouble sleeping and eating since her death,” he says. “He urgently needed to reach our industry’s current HUD service provider. After several 90 minute waits he never got through. He called me this morning sobbing because he’s sure he’s going to lose his home. This is not a fairway customer, but it is something we need to address to prevent a ripple effect that will further damage the industry.”
Broader Reverse Mortgage Industry Reactions
Wendy Peel, Managing Director and Partner in reverse lending at BlackFin Group, congratulated Celink and NRMLA on their efforts to facilitate this transition.
“Congratulations to Celink and NRMLA for persisting in demonstrating compelling data for HUD to make such a change,” Peel told RMD. “For years, many investors have suggested that the HECM service would benefit from subject matter experts. Ultimately, it is the senior/borrower who should expect customer service to be consistent. Perhaps equally important, future borrowers can benefit from lower fees. This is an exciting time for reverse mortgages.”
All Reverse Pro’s Elly Johnson and co-chair of NRMLA’s HUD Issues Committee was also delighted with the new contract.
“This is great news and something that many in our industry have been campaigning for for quite some time,” she told RMD. “This is another step in the right direction. Celink’s expertise in maintaining the HUD HECM assets will go a long way in maintaining the product and providing higher levels of customer service.”
The importance of developing a reverse mortgage servicing process was highlighted in comments from Jeffrey Birdsell, VP of lending programs at reverse mortgage origination (LOS) provider ReverseVision.
“Reverse mortgage servicing is a very specialized process and it takes years to develop a system that supports this type of servicing,” Birdsell explained. “It also takes years to put staff and processes together to support seniors and their use of their reverse mortgage. Over time, one also learns to gain a thorough understanding of HECM products and the impact of maintenance on seniors. When loans are not serviced correctly or on time, it is a reflection of HUD, HECMs and the industry.”
Given the overall complexity of developing the reverse mortgage service process, the likelihood of difficulties is high, particularly for any organization with lesser familiarity with reverse mortgages, Birdsell said. Because of this, Celink’s naming should prove encouraging for the industry, he explained.
“The news that Celink has been awarded the contract is very reassuring for the industry, knowing that there will be no transition period as a new service provider ramps up and [the industry knows] that Celink is already an expert at working with seniors, families and estates with these loans as they go through the maturity process,” he said. “This is a huge win for HUD, the industry and most importantly for the seniors who have and rely on their HECM loans.”