Yogi Berra said ‘the future ain’t what it used to be”. One of the biggest challenges any industry, city or individual can face is to embrace the reality that things will never be like they were before and look for new ways to succeed in the new normal of doing business.
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Our nation’s capital is often referred to as the swamp in part for its political factions, bureaucratic battles and interagency turf wars. Recently two U.S. senators recently vowed to block any nominees for several key vacancies at the Department of Housing and Urban Development. Senators Tammy Duckworth and Dick Durbin-both Democrats- vowed to put a hold on all HUD nominees, including the appointment of Brian Montgomery as Commissioner of the Federal Housing Administration. The Senators sent a letter to HUD earlier this month requesting a response no later than April 18th.
“As long as hundreds of Illinoisians’ lives are stuck in turmoil because of rash decisions that HUD fails to effectively or fully explain, I will object to every nominee Donald Trump sends our way,” said Senator Duckworth. Some of the agency’s current vacancies include the FHA commissioner, secretary of policy development and research, and the secretary for public and Indian housing.
At the root of the debate is HUD’s recent announcement to close two public housing developments in Thebes, Illinois. The agency said they do not have the funds to fix them. What most don’t know is that HUD does not directly manage public housing properties but rather relies on local housing authorities. Enter the Alexander County Housing Authority. In early 2016 allegations surfaced of…
Our collective experience as reverse mortgage professionals shapes our perspective. Much of that perspective in recent years was influenced by falling endorsement volumes. The reverse mortgage industry posted a record 114,000 endorsements in 2009 just as the housing and economic crash began in earnest. Consequently volumes plummeted with housing values. In the years that followed, endorsement declines were commonly attributed to increased relegation and product changes. But what perspective can we gain when looking at our industry’s growth in the last decade?
James Veale is a numbers guy. Not surprising considering his extensive work prior to originating reverse mortgages as a Certified Public Accountant with a Masters in taxation. In his recent column published in Reverse Mortgage Daily Veale writes, “During the last decade, the industry produced more than twice as many endorsements (707,915) as the total endorsements for all fiscal years that preceded it (346,177). We not only saw the 500,000th endorsement in the last decade but also the 1 millionth.”
As a frame of reference, let’s review previous HECM marketing efforts.The summer edition of Reverse Mortgage Magazine published by the National Reverse Mortgage Lenders Association (NRMLA) touted 2017 as the ‘30th anniversary of the HECM’. In its first decade, the HECM was a relative unknown to older homeowners. That quickly changed in the mid-2000’s when big bank lenders such as…
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Acting CFPB Director Mick Mulvaney said,“Regulation by enforcement is done. We’re not doing it anymore”.
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To say that today’s retiree is not prepared to retire is an understatement. More American’s approaching retirement have little or no savings to fund their non-working years. Not surprising in light of fewer pensions, higher inflation and rising healthcare costs. Many find themselves unable to adequately invest for retirement struggling to cover their daily living expenses. However, one of those expenses can be a forced retirement savings plan- the home mortgage.
Since the post-depression era, American homeowners dutifully paid their mortgage throughout their working years while raising a family or paying for their child’s college education. Years later, many were able to participate in the rite of passage transitioning from work to retirement paying off their mortgage. The elimination of their largest expense allowed them to enjoy a modest but comfortable retirement. At this moment more seniors are waking to the reality of just how fragile their finances truly are. Much of this can be attributed to the shift away from company pensions to workers funding their own retirement accounts such as 401(k)s and IRAs, two recessions and higher costs of living. Many older Americans find themselves forced to work well into their golden years. In 2017 it was reported that over 9 million seniors 65 and older continue to work compared to 4 million in 2000. For older Americans, the fear of death often pales in comparison to outliving their money.
The good news is despite numerous product changes, millions of seniors stand to benefit using a reverse mortgage to…
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It’s no secret. Industry stakeholders, originators, and pundits have lamented the stagnation of reverse mortgage originations since the housing meltdown of 2009. Certainly we could partially attribute the lack of market expansion to the exit of big bank lenders such as Wells Fargo and Bank of America. We could also point to fewer applicants meeting the requirements entailed in the Financial Assessment. Perhaps more significant are the series of lending ratio or principal limit factor reductions that have closed the door to homeowners seeking to payoff a significant mortgage balance.
While reportedly 10,000 baby boomers retire each day, home values rising, and more retirees are lacking the funds to retire comfortably, fewer are taking a reverse mortgage. This paradox begs further examination.
Perhaps one clue can be found in our industry’s historic response to product changes. For example the…
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The number of allgeged ‘foreclosures’ have raised the eyebrows of lawmakers tasked with overseeing HUD’s budget and the HECM program…
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In the last decade more senior homeowners have leveraged their home’s equity to fund their retirement years. For many it was refinancing their home for lower payments, others opened a home equity line of credit, while some chose a reverse mortgage. The most recent evolution of the federally-insured reverse mortgage significantly front-loaded loan costs which will impact the attractiveness of the HECM as a HELOC alternative.
Despite its higher upfront costs, seniors should strongly consider the long-term costs and risks associated when taking out a home equity loan. TransUnion expects that nearly 10 million homeowners will take out a HELOC in the next five years. Deja vu anyone? During the housing boom, HELOCs became the preferred way for homeowners to tap into their equity. Few, however, were aware or carefully considered the consequences of such a decision overlooking the limited draw period during which one could access the funds and more importantly, the repayment period when many homeowners experienced payment shock being required to make interest and principal payments. According to an October 2016 report from TD Bank, 33% were unaware of the HELOC’s reset provision. That number spiked to 42% for seniors. Even more concerning is 34% believed their payments decreased after ten years during when the loan reset, not knowing they would be paying significantly more.
The inconvenient truth is that seniors suffer the most having limited financial resources or a fixed income when taking out a HELOC, not fulling understanding the loan or having a plan to absorb increased future payments.
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To say that HUD’s most recent changes to the Home Equity Conversion Mortgage were met with mixed reviews would be the understatement of the decade.
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A traditional mortgage broker called her saying “there’s just not enough money in the new reverse mortgage so I told her we can’t help”. Are your referral sources closing the doors to a potential client unnecessarily? Where do you begin? (There is no transcript for this episode)
