Examining the HECM’s Viablity

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Truth be told, the HECM is not the only loan that is dependent on the government

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The United States is in the mortgage business and in a big way. I have had to repeatedly remind myself that Uncle Sam’s reach in mortgage lending goes far beyond Home Equity Conversion Mortgages. At times many reverse mortgage professionals may lament our industry’s near total dependence on the federal government when in reality the majority of the housing market is regulated and ultimately backed by the taxpayer. The HECM is no exception.

This point should not be overlooked when considering the recent news that President Trump issued a memoranda instructing the Department of Housing and Urban Development to report back on the financial viability of the HECM program. A proposition that has caused considerable concern. It’s not a shocking development being mindful the program has generated significant claims since being moved to FHA’s Mutual Mortgage Insurance fund in 2009. Subsequently, FHA officials have wrestled with just how to stop the continuous stream of…

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Trump to HUD: Examine Viability of HECM Program

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The HECM tops the list of Trump Administration’s HUD reforms

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President Trump has directed HUD to examine the ‘viability’ of the Home Equity Conversion Mortgage and to take other steps to strengthen FHA and the housing GSE’s Fannie Mae & Freddie Mac…

The Bank of Mom & Dad

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Reverse Mortgages & parental down payment assistance

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It’s both a demographic and social phenomena. More parents are supporting their adult children, in many instances keeping them financially afloat according to a recent article in The Financial Brand. Many reverse mortgage originators have seen their borrowers use a portion of their loan proceeds to help pay for college or bail out their children from financial peril. That trend is expected to increase for parents of Millennials. The question is are today’s baby boomers selling out their own retirement to help their children?

A Radically Different Approach

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A unique approach to loan risk management

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The concept of the reverse mortgage is not merely an American phenomena. China, India, the United Kingdom, and Hong Kong all have their own unique reverse mortgage programs to help their older populations age in place. However, one country has a unique and intriguing approach to managing risks to its program.

The Hong Kong Mortgage Corporation Limited offers the Reverse Mortgage Programme. One of the most interesting options offered is the ability of the homeowner to assign their life…

 

Homeowners Marooned

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Australia’s cautionary tale for America

[Download transcript] It’s said that nature abhors a vacuum. In the case of Australia, the question is who will fill it? Like an episode of Lost, senior homeowners in Australia now find themselves marooned being unable to tap their equity with no monthly payments. “Retirees are being blocked from accessing the money trapped in their property as banks pull out of the reverse mortgage market, fueling a growing income inequality among older Australians”, writes columnist Eryk Bagshaw for the Sydney Morning Herald. We had reported the recent exit of Australian banks from reverse lending in the wake of several large bank exits, many who feared repetitional risks in the wake of several negative media stories.

Even retirees who made contributions to Australia’s superannuation fund find themselves facing poverty. The superannuation or super is Australia’s compulsory program which requires compulsory minimum contributions of a percentage of one’s income into a government-managed portfolio. Australia, like many developed countries, finds itself threatened by tax policies which limit tax-advantaged retirement savings contributions. Today Australia, like the United States, is grappling with how to keep their rapidly expanding older population from slipping into poverty. or placing a further strain on its social welfare programs.

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Will this Save the Reverse Mortgage Industry?

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More looking outside the HECM as a single solution

What will save the reverse mortgage industry or at least put us back on a trajectory of sustained growth? One industry leader sees a path for recovery- one that broadens our vision and approach. Finance of America Reverse’s President Kristen Sieffert has successfully made inroads in expanding the reverse mortgage’s appeal. First, by engaging traditional mortgage originators through a strategic campaign that couples education and motivation. More recently, she helped shape Finance of America’s flagship jumbo reverse mortgage- the HomeSafe Select. The loan’s unique features such as a line of credit and the ability to be placed as a second lien behind a low-interest rate first mortgage align with the lender’s mission to be a retirement solutions provider.

So what is the solution to stop the slide in loan production? “It’s critical to be focused on what will help Americans get to work on retirement more holistically”, says Sieffert in her recent interview with the Reverse Review. “Historically our industry has offered a single solution to everyone...

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Should we tear down the wall?

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Diversification or Separation of HECM and Traditional Mortgage Lending

As the national debate on the morality or effectiveness of a wall on our southern border rages on, one barrier is being slowly removed. As the number of the federally-insured reverse mortgage loans has languished in recent years, more former reverse-only lenders are making their entry into traditional mortgage lending; in effect removing what was once a barrier of niche mortgage lending for some.

Considering such diversification, it’s natural to ask if loan officers can be just as effective in originating both traditional and reverse mortgage loans. That question brings to mind a statement made 10 years ago by a formerly forward-only originator. Seeing the upcoming spate of changes to the HECM he said, “watch, they are going to turn this into a traditional mortgage”. One could easily argue the enactment of the financial assessment and the verification of an applicant’s income and assets does indeed mirror much of what is common practice for traditional mortgages. Despite the similarities, there are two conflicting viewpoints on whether originators should remain specialized or offer both loans…

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The Source of All HECM Endorsements

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The leading indicator of HECM loan volume

Which came first the chicken or the egg? There’s no number that reverse mortgage lenders and originators track more closely than our monthly endorsement totals. That is, the number of federally-insured reverse mortgages that are formally ‘insured’. In fact, our monthly Top 100 HECM Lenders report is the single most popular item on HECMWorld.com. As our industry closely follows the number of HECM loans endorsed each month there’s another metric that is largely overlooked, Case Number Assignments (CNA’s). While all originators know that endorsements come from an application for a federally-insured reverse mortgage, many are not closely watching the leading indicator of future loan endorsement volumes.

FHA HECM case numbers are issued when a reverse mortgage application has been officially submitted. As such they are our most accurate barometer of consumer interest as evidenced in submitted applications. Case numbers also provide a leading indicator of future month endorsement totals. FHA publishes their most recently released case number assignments in their monthly publication entitled the “FHA Single Family Production Report” which tracks the issuance of case numbers for traditional and reverse mortgages insured by the agency.

The historical average time from a HECM’s case number assignment to endorsement is…

Older Homeowners Facing 3 Risks


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Even retirees who saved for retirement are at risk

Older American homeowners may want to take a second look at all their retirement options sooner than later.  Retirees who have saved for their retirement may find themselves challenged more specifically in three ways: home appreciation, stock portfolio losses, and increasing interest rates. [download transcript]

Seasoned reverse mortgage originators can certainly recall how the borrowers who took the loan prior to 2009 locked in a portion of their home’s value despite the market crash. While it’s highly unlikely that we’re in another housing or credit bubble, home appreciation is slowing nationwide in 71 of the largest 100 markets. According to the latest data from Black Knight, home values have shown their biggest single-month decline, albeit a modest one, since the housing market began to recover. In the west, California saw home price appreciation growth drop from 10.3% to 3.7% in nine months. While far from a death knell for the housing market this does serve as a reminder that a homeowner’s access to equity is no certainty, and what equity they have could dwindle significantly. A point worth making with prospective borrowers.

While the nation watches the stock market on their daily news shows, retirees are especially wary with good reason. Despite the Dow Jones Industrial Average’s significant gains in the last 3 years, the overall equities market remains volatile. That volatility is particularly real for retirees who may find themselves unable to draw the same amount from their investments each month without significantly shortening the life of those funds. As a recent New York Times article put it “If you have to start selling investments when they are worth less, you’ll have to sell more shares to get the cash you need — and the

More than a cliche: Back to Basics


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Increased sales skills effectiveness

One of the things we don’t have to tell you is that the business of originating reverse mortgages is challenging. Some see new sales opportunities.  Others say it is time to get back to basics. That was one of the themes heard on last week’s conference call presented by Reverse Mortgage Daily.  But don’t dismiss this as a common cliche. It’s not.

The reality is reverse mortgage originators are now being forced to revisit core sales skills and strategies to make a living in today’s challenging marketplace. What are those strategies? We will touch on a few today. But before we do a here’s a collective gut check. ‘Am I do everything possible today to see the maximum number of potential reverse mortgage borrowers?’ Most of us can honestly answer- no- seeing that there is always room for improvement.

First, how often you’re getting out of your office?

Tom Kelly’s Article: The Comparative Expense of a Reverse Mortage

Suggested reading:

How to Master the Art of Selling
Tom Hopkins

Influence: The Psychology of Persuasion
Robert Cialdini

Attitude is Everything
Jeff Keller