Preventing Foreclosure
The following was originally published in November 2011. Despite much of the recent negative news coverage reverse mortgages have helped countless older homeowners avoid inevitable foreclosure and eviction.
Personal success stories are a powerful vehicle to imprint the value of a product or service in potential clients’ minds. The following true tale will brighten your prospects’ holiday season.
Reverse Mortgage To Prevent Foreclosure
A reverse mortgage was a lifesaver for 77-year-old Isidoro, who had been in foreclosure due to the current economy. By the time he contacted Security One Lending, Isidoro was on the verge of losing his home to foreclosure within a few months. He was faced with moving out of his home and trying to find a rental somewhere on a Social Security income of just $800 a month, which would have left him with precious little money for food and other necessities.
Security One’s loan advisor quickly realized that the home’s value was in decline — something many Americans are experiencing now. Chase Bank had tried for the better part of a year to “short sale” the home, with no offers. Fortunately, the bank has a program to accept a reverse mortgage in lieu of a short sale.
Security One Lending negotiated with Chase Bank over several months — and several foreclosure extensions — to ultimately shave a whopping $182,000 from the principal note balance. Additionally, the loan agent was able to drastically reduce the reverse mortgage loan fees to allow the client to qualify, and have his existing Chase Bank loan paid off in full — which kept him from losing his home.
Isidoro retains full title to his home, and can never lose the house due to non-payment. That’s a true holiday gift!
5 Comments
Now the question becomes is their loan still performing and has the borrower had any property charge defaults? Has the HECM terminated and if so, was the HECM foreclosed?
The problem is we did a LOT of this from about 2007 to late 2013 but a substantial percentage of them backfired because the borrowers lacked the asset and income base to meet property charge requirements. Can you tell us the history of the loan?
Even better, can you speak with the borrower or, if the borrower is deceased, the heir who took title to the collateral.
If all went well with the loan, can there be a better testimonial? BUT IF the loan went wrong and we are using it as a “success story,” how great would that be? Better to get the due diligence done EVEN now than to get blindsided later, right?
The Positive Realist thinks the measure should be how many failed. I suggest we look at how many succeeded. I don’t like the idea of the government taking away the loan program I used to buy my home in 2001 because some people didn’t pay. I don’t like the idea of the government taking away the loan program my son used to buy his home in 2006 because some people didn’t pay. I don’t like the idea of the government taking away the loan program my brother in law used to buy in 2006 because some people didn’t pay. I don’t like the idea of the government taking away loan programs many of my borrowers found useful because some didn’t pay. Most of these loans served the borrowers well.
I explain to each borrower that I arrange the loan, forward or reverse, but I don’t make the payments. I tell them what the payments are at application and at closing. If they don’t want to make the payments, don’t sign the paperwork. If they apply for the loan, it’s approved, and closed, they are expected to make the payments. All they need to know is if they try to live in the house without making the required payments, the sheriff is on the way, their stuff will be on the street, and the locks will be changed. This is the harsh reality with any mortgage from any lender. If they don’t want to make the payments, sell the house, pay off the loan, and everyone will get along fine.
I’m tired of being blamed for a borrower’s choices. I’m tired of loan programs being taken from responsible borrowers who pay because of a few that don’t.
Don Opeka
Orion Mortgage, Inc.
Don,
The first two sentences of your reply above show hostility towards self-evaluation of failure. Beyond that they are rather inconsequential. First the successful termination rate on HECMs endorsed from 10/1/2006 through 9/30/2013 (fiscal years 2006 through 2013) is quite low since so few of these HECMs have terminated. Based on that one fact, your argument is overblown. The only HECMs of interest as to failure are those endorsed during the fiscal years previously referenced. Let us define failure as meaning HECMs that terminated in borrower eviction. As to the period to be analyzed, your example of 2006 is an excellent one so let us extend the period under examination to the decade that begins on 10/1/2004 and ends on 9/30/2014 (for a total of 10 fiscal years). The failure summary should be done on a fiscal year by fiscal year basis.
As to the first paragraph, you use the pronoun “I” six times followed by using the pronoun “I” four times in the first sentence of the second paragraph. You use that same pronoun twice in the final paragraph. That is 12 times the pronoun “I” is used in a reply of about 260 words (including articles, pronouns, and other word forms). It seems you have concluded that the object of the comment is YOU, personally. Yet that was not the object it was directed to. If you felt uncomfortable reading it, consider if that had not been the objective all along. Surely the purpose was to make originators who listen to the vlog and read the comment feel a little less comfortable about the HECM borrowers who they rescued from foreclosure and had their HECMs endorsed in the fiscal years described above.
Starting with the third sentence of the first paragraph you tell us four times in one form or another that the government is taking the HECM program away from us. Yet I can find no Congressional hearings on that topic either in the past or scheduled for the future. While HUD is protecting the MMIF due to excessive losses generated from HECMs endorsed after 9/30/2008, there is nothing showing HUD has any interest in shutting down the HECM program. What you seem to be expressing is the irresponsible thought that the HECM should NOT be harnessed to reduce the troublesome losses to the MMIF. It is doubtful that the combined PLF and MIP changes of 10/2/2017 coupled with the collateral assessment requirement of 10/1/2018 will sufficiently mitigate MMIF losses so that the program will not be adjusted early in the next decade.
In the second paragraph, you begin describing the requirement of all mortgagors to pay all property charges which is factual; however, that is not exactly a novel or compelling argument. It lacks any empathy toward a borrower who is a senior (a member of a protected class) and is under the duress of trying to cure a default on a mortgage against the principal residence. Your “tone” is particularly harsh since the lender is expected to have found the character, capacity, and capital sufficiently acceptable to keep the loan performing throughout the anticipated loan period. Yet the fiscal years under examination were before financial assessment. In case you have not experienced foreclosure, trying to cure a default with foreclosure looming does not put seniors in the mood to consider each and every thing you so honorably try to get across. In this unique situation, counseling should be required before origination and then recommended after closing as reflected in a disclosure indicating that the second counseling would be free of cost.
I would praise you as someone who should be considered a hero for going out of your way to rescue seniors out of foreclosure but your harsh and unsympathetic attitude toward them as HECM borrowers, leaves one in a quandary. Do you really understand them as people going through one of the most horrific events they can go through as a senior, the loss of their home? I put several events before that but not many. For example, there are two categories that have a greater negative impact: the loss of a close family member and a severe medical problem for the senior or a close family member.
Next time try to express the sympathy and empathy you feel towards seniors in these predicaments. I had a hard finding any in your reply.
It’s interesting that you use an article from 2011 as if this isn’t happening now. I closed a HECM this month for a lady, age 101, still in her home. Her forward mortgage payment exceeded her income. She was behind on her mortgage payments and getting multiple collection calls each day. A HECM eliminated a $1,665.23 mortgage payment including taxes and insurance because of a LESA, and provided $801.74/month in extra income on a Tenure payment. Total budget change was $2.466.97/month. Her options were foreclosure or HECM. She can stay in her home for less cost than virtually any government subsidized housing program.
I have several stories of people staying in their home for less monthly cost than government subsidized housing. Why aren’t these stories being told? My elected federal Representative, Ed Perlmutter, would not allow me to participate in his senior resource fairs and tell these stories because I am a “for profit” business. I spoke with him personally, not just staff. He wants to promote tax funded programs.
Thank you for the opportunity to be of service. Don’t hesitate to call us if you have additional questions or if we can be of service in any other way.
Donald J. Opeka – President NMLS# 261505
Licensed Colorado Mortgage Loan Originator 100007878
Don,
While once common, your heroic story of rescuing a senior from foreclosure is currently much rarer today even as a percentage of total fiscal year endorsement totals than it was just a decade ago. Rarer yet is the required use of a LESA as part of that story. Please tell us how this story can be repeated by even you monthly. Also why do you believe that this is a permanent solution to this senior’s situation?
Yet again and we see the rather reckless use of the term income to describe HECM proceeds. “Extra income” describes things like oil royalties, music royalties, income from a charitable remainder trust, and other such types of ACTUAL income. This is yet another example of the inappropriate use of the word, income.
What happens when the youngest borrower age gets nearer to the TALC life expectancy? The LESA will be all but drained. At that age when it is shown that the property value is probably insufficient to refi into another HECM, what looked great at 65 (or whatever age) will be looking a lot worse then. But don’t worry about the future for today you are THE HECM hero.