Initial Impact & Slow Turnaround

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Taking the long view despite short term impact of Assessment

reverse mortgage news

The reverse mortgage industry is relatively small compared to the traditional lending marketplace yet the recent financial assessment has changed our collective world.

It comes as no surprise that the financial assessment is a game-changer for the Home Equity Conversion Mortgage program. We saw a rush of applications prior to the April 27th deadline and the subsequent trailing endorsement volume reflected a push by lenders and borrowers to forgo the requirements of the assessment. Now that the pre-assessment rush is behind us we can begin to measure the true impact of the new financial guidelines as reflected in the recent top 100 HECM lenders report from Reverse Market Insight…

 

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Looking for more reverse mortgage news, commentary and technology? Visit ReverseFocus.com today.

What’s Stopping Them?

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Academic study links consumer knowledge to HECM demand

Misinformation, fear, a biased media? Are these the factors stopping older homeowners from utilizing a reverse mortgage?

reverse mortgage newsA recent report entitled “Reverse Mortgages: What Homeowners Know and How it Matters” states that knowledge of the HECM product is strongly associated with consumer demand. Today the knowledge of reverse mortgages in the general public is fairly low. The report is co-authored by Dr. Thomas Davidoff, associate professor for the Strategy & Business Economics Division at the University of British Columbia Sauder School of Business. Davidoff focused on the level of financial literacy amongst homeowners 58 and older and how their knowledge of the reverse mortgage influences the overall demand for the product.

Surprisingly 97% of survey respondents have heard about reverse mortgages with only 2% having any practical experience with the loan…

 

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Looking for more reverse mortgage news, commentary and technology? Visit ReverseFocus.com today.

In Their Best Interest

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Reexamining HECM Fund Distributions & Loan Recommendations

reverse mortgage newsToday’s interest rates are at historic lows providing reverse mortgage borrowers with extraordinarily low rates. The borrower has a small mortgage balance to pay off. Should they secure this rate with a fixed rate HECM to take advantage of such an opportunity?

To begin with I hope our viewer’s collective answer is “no”. To chase after low interest rates while maximizing the initial draw or disbursement is akin to asking the borrower to walk over a dollar to pick up a dime. Such a scenario reinforces the need for HECM professionals to exercise the highest level of care when it comes to structuring a borrower’s initial disbursements.

Fixed Rate HECM. The fixed rate reverse mortgage was extremely popular until HUD revamped their product lineup in mid 2013. Without disbursement limits in place Standard Fixed Rate HECMs accounted for 70% of all loans originated at the time the Consumer Financial Protection Bureau drafted their report to Congress in June of 2012. The CFPB argued these loans placed more risk on FHA for potential defaults as the loan balances grew more quickly than their adjustable rate counterparts.

What about today’s fixed rate HECM? The fixed rate is now subject to HUD’s first year distribution limits and is…

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Looking for more reverse mortgage news, commentary and technology? Visit ReverseFocus.com today.

Interest Rate Cliffhanger

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The Potential Impacts When the Fed Raises Interest Rates

Federal Reserve Fair Open Market Committee meeting
Federal Reserve Fair Open Market Committee meeting

It’s been a cliffhanger of sorts. The U.S. economy appears to be recovering yet their are fundamental issues that are not resolved. In the wake of the financial crisis of 2009 interest rates have been held at historic lows. Good news for reverse mortgage borrowers and lenders alike.

For several months the word on the street has been that the Federal Reserve would be increasing short term interest rates. Last Thursday the Fed announced postponing any rate increases until later this year, perhaps waiting for improvements in the labor market.  Until then the question is what would the impact be for the federally-insured reverse mortgage?

Jerry Wagner of Ibis Software said “Short-term rate hikes of 0.5% or 1% will have little effect. Long term rate hikes have a big effect as Principal Limit factors will be smaller.” Today Home Equity Conversion Mortgage interest rates are keyed to the…

 

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Looking for more reverse mortgage news, commentary and technology? Visit ReverseFocus.com today.

Does the Assessment Require the Kitchen Table?

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Does the Financial Assessment Require Face-to-Face Meetings in the home?

reverse mortgage news

Much has been written about the Financial Assessment, especially the level of personal financial information required and the rapport needed to build the trust to gather such information. Does this mean that the assessment requiresface to face meetings with potential borrowers?

A recent article in Reverse Mortgage Daily addresses this vexing question. Until a few short years ago the vast majority of reverse mortgage sales took place at the homeowner’s kitchen table. An intimate setting where seniors typically handle their personal finances and paperwork. With the advent national television campaigns call centers began to…

 

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Looking for more reverse mortgage news, commentary and technology? Visit ReverseFocus.com today.

The Truth About Origination Fees

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Clear Guidance & Open Communication Needed

fees-bagTruth be told most prospective reverse mortgage borrowers focus on the cash benefit, not the pricing. That soon may be changing and each of us as reverse mortgage professionals had best be prepared. Last week the Mortgage Professor, Jack Guttentag,  published a article on his blog entitled “Are HECM Reverse Mortgages Overpriced?”

As our industry struggles to shed our reputation as an expensive loan of last resort perhaps we should consider a few ways in which uninformed homeowners approach the loan and how we communicate when it comes to origination fees.

First of all origination fees are often a necessary…

 

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Looking for more reverse mortgage news, commentary and technology? Visit ReverseFocus.com today.

Assessment Confusion: Extenuating Circumstances

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Many Originators Seeking Clearer Guidance Under Assessment

reverse mortgage newsYour applicant’s credit history isn’t so rosey. A smattering of late payments on credit accounts, an overdue property tax installment or problematic medical bills. Such issues often require an explanation of extenuating circumstances.

The HECM Financial Assessment has transformed the process of originating reverse mortgages and consequently complications will arise, often around the issue of extenuating circumstances. Extenuating circumstances put quite simply are factors that explain the underlying reasons for blemishes in the applicant’s credit history. This is key as the credit history and payments help determine the borrower’s ‘willingness and capacity’ to meet the ongoing obligations of the loan.

HUD notes that lenders must make a “connection between the specific occurrence(s) and the measurable impact on the occurrence(s) on the mortgagor’s finances”. Quite honestly it is a subjective process.

 

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Looking for more reverse mortgage news, commentary and technology? Visit ReverseFocus.com today.

Don’t Close the First Time

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Why One-Appointment Closes are Doomed to Fail

reverse mortgage newsWith the increasing complexity of the HECM and the Financial Assessment attempting to educate and close your prospects in the first appointment is akin to asking them to drink from a firehose.

Each of us may be reverse mortgage professionals, educators and evangelists spreading the word of the benefits that the reverse mortgage offers. However stripping all titles away we are truly salespeople in the business of matching prospective homeowners with a reverse mortgage when suitable. With this in mind each of us should examine our approach and consider are we asking for too much too soon?

In my early days of originating reverse mortgage the product was simpler: one product, one margin and fewer complexities. This often allowed me to take an application on the first appointment. Today, everything has changed. The sheer volume of information we should be reviewing in person or by phone in our first encounter is…

Download a transcript of this episode here.

Looking for more reverse mortgage news, commentary and technology? Visit ReverseFocus.com today.

It’s Getting Personal: The Financial Assessment

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The Challenges of Diving into an Applicant’s Highly Personal Financial Information

reverse mortgage newsFrom building trust or diving into one’s very personal financial data the financial assessment presents challenges and opportunities alike.

In marking the division of history one may refer to B.C. or A.D.. For the reverse mortgage industry we have NA and FA, no-assessment and financial assessment. That point in time can be marked as April 27th 2015 when HUD’s Financial Assessment guidelines went into effect forever changing the face of the Home Equity Conversion Mortgage program.

The in depth review of an applicant’s highly personal financial data has created a mental hurdle that many struggle to overcome…

 

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Looking for more reverse mortgage news, commentary and technology? Visit ReverseFocus.com today.

A Lucrative Option?

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Reverse Mortgages hold advantages for the ‘mass-affluent’

reverse mortgage newsReverse mortgages can be a valid retirement planning tool for those in need of cash but also for those who are financially well off.

Last Monday the Huffington Post published “Is a Reverse Mortgage a Lucrative Option with your Financial Situation?”. Cited in the article was a white paper published by Edinboro University stating that using a HECM line of credit is more lucrative than selling investments. This speaks to the mass-affluent borrower with substantial retirement savings and investments as opposed to the needs-based-borrower of the past.

Beyond merely preserving the portfolio by not selling depreciated assets the study cites the tax benefits. “Commonly, retirees will use 401(k) funds, or other savings to pay off a mortgage. But if there’s enough equity in the home, the reverse mortgage could be used instead of using tax-deferred savings.” A good point since qualified…

Download a transcript of this episode here.

Looking for more reverse mortgage news, commentary and technology? Visit ReverseFocus.com today.