A Look Back at a Bumpy 2013
For reverse mortgage professionals 2013 will go down as a bumpy ride. And what a ride it has been. In the last ten years I cannot recall a year with more substantial and industry-changing developments. 2013 was rang in with HUD’s announcement they would be ceasing the problematic Standard Fixed Rate Product. While it helped many borrowers who needed maximum proceeds to payoff existing mortgage balances it also added to FHA’s risk of future insurance payouts from its Mutual Mortgage Insurance (MMI) fund. One look at the amortization chart of a fixed rate loan with the full upfront distribution and it didn’t take a mathematician to figure out substantial risk was baked into the fixed rate loan. Unfortunately generous payouts in loan compensation unduly influenced some originators where a more flexible adjustable rate loan may have been more fitting.
While politicians may be adept at spending money they are also politically astute knowing a faltering FHA Home Equity Conversion Mortgage program required some painful changes lest they incur the wrath of watchful policymakers and voters. HUD asked for and received the authority needed to make program changes witht the passage of the Reverse Mortgage Stabilization Act which led to product consolidation. After eliminating the standard fixed rate in April HUD moved to eliminate the standard adjustable and both saver loan programs altogether in favor of one two-tiered product.