In the first part of a Q&A on RMD with former Government National Mortgage Association (GNMA, or “Ginnie Mae”) President Ted Tozer, he discussed the posture of the Home Equity Conversion Mortgage program ( HECM) and its service challenges. In this second part, Tozer offers more thoughts on the administration of the HECM program by the Federal Housing Administration (FHA), some of the challenges he faced during his time with the Obama administration, and even some of the interest for reverse mortgages. he observed other nations.
The pension crisis is not an isolated American problem. Representatives of other Western nations, particularly throughout the European Union as well as Australia and New Zealand, have been developing their respective reverse mortgage industries to find another potentially viable solution to creating liquidity among older segments of the population. Tozer describes how he saw this firsthand during his leadership at Ginnie Mae and beyond.
RMD: The previous administration had made recommendations to reform the HECM program which were both legislative and administrative. From your perspective, do you think there are concrete steps on the administrative side that the FHA or the reverse mortgage industry itself can take to improve its position, or is there really a need for legislative action?
Ted Tozer: I think a lot of work can be done administratively, especially on the part of the FHA in general. The private sector can also help, but I think the FHA is at a point where what bothers me is that the FHA is concerned with the process, not the outcome. [If a borrower has] a document they can’t find 10 years ago, but the loan is [otherwise] fine, so if it really doesn’t affect your ability to enforce the mortgage and move forward, don’t dwell on it because it doesn’t fit your process.
Everything should be results-based. And I think that’s what I’d like to see from the FHA, both forward and backward. I wish they would look more at how it affects the borrower, the property, etc., instead of basically saying, “According to our guidelines, you must follow these three steps.” You missed some stuff. But if it didn’t change the outcome, why do you care?
RMD: Ginnie Mae was without a permanent full-time president between your resignation and the confirmation of incumbent Alanna McCargo. Do you think this has had a negative impact on the stability of the reverse mortgage business on the securitization side?
TT: Ginnie Mae’s career staff is as good as anything you’ll ever find, whether at Fannie, Freddie or anywhere else. This career staff [is focused on] to advance. The career staff that we have, I think, is really unique at Ginnie Mae. It’s because the senior management of Ginnie Mae, basically, everyone who worked in really technical areas all came from the private sector. They are not [longtime] government employees.
The person who runs the Capital Markets Group, which does all the REMIC business where most of these HECMs end up and develops markets for HMBS, came from Wall Street. He didn’t work for the government until he came to work for Ginnie Mae.
The person who is responsible for managing the transmitters, she comes from Freddie Mac and Fannie Mae. So the people there know what they are doing. They are very competent from a technical point of view, and I think they did an excellent job during the last administration. They became really respected to the point where even though they had a career, [political] people respected them to set policy.
RMD: Is there a disconnect between these two groups of people, generally?
TT: From my experience in government, it was a fact that in most organizations career people were seen as being there to execute policy [that was] developed by politics [appointees]. Well, without a confirmed president, they were able to move on. […] Since they come from the private sector, they are all keen to get the job done. So they stepped forward to set the policy to do what needed to be done, even without the coverage of a policy [appointee].
Whereas in other parts of government career people are really concerned with making policy-type decisions, whereas Ginnie Mae staff again, both because they’re so knowledgeable on the technically, plus the fact that they come from the private sector, I think they really weren’t intimidated to make certain policy decisions themselves. So I don’t think it really hurts. The only thing that might have hurt was the concept of interdepartmental discussions.
RMD: Do you think people in government should talk about the reverse mortgage program more than they did during your time at Ginnie Mae, or more than they do now from what you have understood ?
TT: It wasn’t talked about much under the Obama administration simply because we had to worry about the bigger housing crisis. And even today, I’ve never heard the Trump administration talk much about reverse mortgages either, simply because it’s such a small piece of the housing puzzle. We’re talking 30-50,000 units, that’s nothing when you compare it to what’s happening in the term mortgage market.
It’s a problem, it’s so small that people forget about it, even if personally, going back to your point about the fact that demographics have basically taken off: I agree. To put it into perspective, what interests me, when I used to travel the world and go to countries like Russia, Mainland China, Hong Kong, JapanSouth Korea to talk about the Ginnie program, we were talking about the regular MBS, but it almost always came back to reverse mortgages.
RMD: It’s really interesting, why?
TT: Because it’s a challenge all over the world. The aging population is poor in housing. So whether it was in Hong Kong, Beijing, Moscow, they all wanted to know how the HECM program worked and how the HMBS program worked because they needed to find a way for their elders to tap into their home equity.
This is because pensions did not keep up with the cost of living and faced many of the same challenges. So that’s why I agree. It’s something we need to understand, and the whole world is working on ways to try to understand it because they have the same challenges too. Seniors are short of money.