1 Comment

1. 

   The Positive Realist

   December 7, 2019 at 6:27 pm

   There are some things to get excited about but I am not so sure this particular new lending limit is one of them. It is kind of like the underwear your parents used to buy you for Christmas. It’s needed and appreciated but not exactly your first choice in a Christmas gift from your parents.

   Most of us would prefer reversing the mandate commonly referred as the 10/2 changes. In the last two years we have seen increases in the lending limit but they had negligible impact on the HECM endorsement volume. Both fiscal 2018 and 2019 had losses. Fiscal 2018 was the normal loss we would have expected from our form of downward sloping, peak to valley, secular stagnation. Fiscal 2019 was nothing but a total disaster for HECM endorsements with a 35.3% drop even from the loss level of fiscal 2018. For all the proponents of proprietary reverse mortgage, please, PROVE that the volume of proprietary reverse mortgages during the twenty-four months ended September 30, 2019, is large enough to offset even 30% of HECM endorsement loss for both fiscal 2018 and 2019. Proprietary reverse mortgage proponents are not selling volume just another but smaller niche product. That MAY change with time but most of the anecdotes I hear about proprietary reverse mortgages are just that, very questionable hearsay.

   Yet Chris Clow in his Friday, December 6, 2019 RMD article provides some insight into a very, very disturbing new NY law on reverse mortgages. It is a milestone, that should be titled, “the Full Employment Act for NY Attorneys (paid for by NY seniors who get reverse mortgages).” Yeah, it’s far too long but think about what it does.

   The NY new reverse mortgage law requires that at least three attorneys attend all reverse mortgage closings. That law will go into effect BEFORE New Year’s Day. It seems as if the two additional attorneys will be paid for by the borrower either as another reimbursed upfront cost or the lender’s attorney as an upfront cost and the borrower’s attorney through an out of pocket cost payment by the borrower.

   So why is this so bad? COST. First the lowest cost should be the one for the lender’s attorney. Second, the cost of the closer’s attorney is part of the t. Third, I would expect that the cost of the borrower’s attorney will be the highest of the two other attorneys. It seems that the borrower’s attorney will want to interview the borrower before closing and make sure that they understand the reverse mortgage and its implications. So is there a cap on the borrower’s attorney’s fees? Since this may not Can we really expect that HUD will stop its counseling requirements for HECMs in NY any time soon? Doubtful.

   Then there is THE doubt. Those familiar with forward mortgages in NY will question why three times the attorneys are required to a reverse mortgage closing. Rather than a closing of a mortgage, this reminds me of legal mediation or a divorce hearing with an administrative judge. It could even be criminal court. Tell me all you want that we have mastered helping seniors to accept HECM changes and ALL I will do is show you the drops in HECM endorsement production over the last two fiscal years. Forgive me saying but the industry has not overcome objections to recent HECM changes. That is just the fiction of industry sales management whose job it is to train us to do that. So far I cannot see their impact helping to improve HECM endorsement volume. So far their efforts have been in vain.

   We will know how much trouble the industry is in as to HECM endorsement production in a little less than ten months. My money is on may be seeing a 15% increase in HECM endorsements IF HECM refis keep be as popular as they are right now. That will bring us to about 38,000 HECMs for 2020 which is about 10,000 shy of where fiscal 2018 (a loss year) ended. The next four years could truly be another era of secular stagnation, particularly, since we see no major changes coming out of HUD that are targeted at higher HECM endorsements. As a realist, it is very doubtful if the originations in proprietary reverse mortgages during the twelve months ended September 30, 2020 will be sufficient to offset the lack of production in HECM endorsements for fiscal 2020 to get the industry to a total of 48,000 from both proprietary reverse mortgage originations and HECM endorsements for fiscal 2020.

   • Reply
   • Link