Karin Hill has spent the past six years helping shape the HECM program. A former high school history teacher turned mortgage banker, Hill brings a unique set of skills to the table. In 2013, when the HECM program underwent a massive overhaul, she turned her focus entirely to the reverse mortgage product and became a regular speaker at industry meetings. Inspired by her belief in the importance of the product, Hill says she is confident in its future demand and stresses the need for HUD and the industry to work together to ensure its sustainability.
What steered you toward this line of work?
It was totally accidental. I have a master’s degree in education, with a B.A. in political science and history, and I always dreamed of living and working in D.C. My career started in the Chicago area as a high school teacher of American and world history. When I moved to California in the late ‘60s, there weren’t many teaching positions available, so I registered with a temporary employment agency and was assigned to a new Construction/Builder Take Out division at Great Western Savings. Within a few weeks I was offered a permanent position, and so began my mortgage banking career. My career in mortgage lending spans single-family, multifamily, commercial and construction lending. I worked for the California Savings and Loan League in the ’80s—a very active time for the S&L industry—where I was responsible for managing the relationship between the league and the mortgage side of the industry. In the ’90s I moved on to American Savings, which was eventually purchased by Washington Mutual Bank (WAMU). During that time, I had leadership roles in compliance, credit policy development, risk management and acquisition integration involving a number of WAMU-acquired companies. I was responsible for leading large cross-functional projects, system implementation, strategic planning and operational execution in all of these roles.
What is the greatest reward of your job?
There are so many dedicated, smart, experienced federal employees who continue to excel in serving the public despite challenges in staffing, technology, funding support and operational processes. Although I have an extensive mortgage lending background, I learn something new every day. Working on the HECM program has been incredibly satisfying. It is a very challenging and complex program, which is so important to so many people. At this point in my career, it has been a privilege to have the opportunity to work on a program of this magnitude.
In the last few years, HUD has made significant revisions to the HECM program. What were the goals of this policy overhaul? Do you feel that HUD has been successful in achieving them?
The goals are to ensure that the HECM program is a sustainable solution for the borrower and to manage risk to the MMI Fund; reduce defaults on property charges and other borrower responsibilities under the terms of the loan; ensure that servicing and claims processes are well-defined and enhanced to reduce risk to the fund; and provide clear guidance for servicers.
I think we’ve been successful in reducing risk to the MMI Fund; improving public perception of the program; enhancing functionality in our HERMIT system; reducing claims backlogs; and engaging frequently with both originators and servicers. I think one of our most complex accomplishments was to provide new policy on non-borrowing spouses, while the origination and servicing policy changes have certainly enhanced public support for the program.
How do you think the industry has adjusted to policy change?
The industry has been very supportive. There have been a few rough spots—not unexpected when you think of the complexity of the work and the number of changes that have been made. As we learn more from the data we are now collecting, we will continue to assess the impact of the changes made and determine whether further changes are needed. Having been in the business for a very long time, I have experienced, as a lender, the challenges of dealing with massive changes, market swings, etc. So I do appreciate that the process of operationalizing significant change is challenging, both for us and industry participants.
How have HECM policy changes impacted the book of business thus far?
ARM loans are now 90 percent of our volume and 62-64 percent of initial draws are 60 percent or less of the principal limit. Draw patterns following the initial disbursement limit are consistent with assumptions that were made in designing the policy. Based on research, we expect to see reduced property charge defaults. It is too early for us to be able to assess performance on the loans that have been originated in just the last year and a half, but we are collecting additional data related to Financial Assessment, servicing and assignment policies, which will enable us to measure the impact of the changes over time. As the industry knows, we are experiencing a decline in volume, but with more public support for the program and the growing senior population, we expect that trend to be temporary.
How can lenders work with HUD to help ensure the success of the program?
I think maintaining a positive outlook (in spite of the complexity and numerous changes) is critical. When we see a problem, we need to be realistic about how to resolve it. And when we see opportunities to introduce a change that enhances the program, we need to work together to accomplish it.
Why do you think the product is so often misunderstood by consumers and financial professionals?
Because it is complicated! In order to really understand how this program works, you have to get into the details. I think we could develop tools that are more consumer-friendly, easier to read and understand, presenting complexity in pictures if necessary to clarify how the program works. I think it is important for families to be more engaged when seniors are considering a HECM. I also think it would be helpful if consumers had a better understanding upfront about what happens when a borrower dies, along with more communication on how HECMs are serviced.
The product has a startlingly low penetration rate, just about 3 percent of the potential market. What do you think it will take for this to change?
I think continuing to improve the program’s reputation and educating the public on how the program works is critical. Lenders and servicers must be vigilant about how the program is being sold, and provide life-of-loan interaction, communication and support to the borrowers. These are high-touch customers, and because we’re talking about seniors, the headline risk is high. So, it is critical for the industry and HUD to work together to ensure that lenders and servicers are following program guidelines. But it’s equally important that we ensure customers are well-informed through clear/understandable disclosures, counseling, sales and underwriter communications, and their interactions with servicing staff.
What is your projection for the program three to five years down the road?
It is hard to imagine that the program won’t grow when you see the increased number of seniors retiring. It will be interesting to see if this program can be more integrated with other tools designed to support seniors and their desire to age in place. We are visited often by representatives from other countries who are exploring ways of supporting aging populations, and this program is viewed by many countries as a very important tool.
