Joined at the hip: The need for private capital in mortgage lending

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The American mortgage market is surgically attached to the Federal government. A recent hearing on The Private Mortgage Market Investment Act exposed just how entrenched and dependent mortgage lending has become on Uncle Sam.

It’s the Golden Rule. He with the gold, makes the rules and that’s what the federal government has done. In the wake of the housing collapse and mortgage meltdown Uncle Sam is telling mortgage lenders the free lunch is over. Obviously Home Equity Conversion Mortgage program is exclusively a federally guaranteed product. For our industry private capital…

1 comment

James E. Veale, CPA, MBT January 28, 2013 at 9:15 am

Without government insurance, the only security a lender has is home value unless of course private insurance companies step in with reasonably priced insurance (very, very doubtful for now). Based on recent history reverse mortgages are very high risk investments demanding lower risk (lower percentage of proceeds to value) and/or higher interest rates.

After the elimination of fixed rate Standards, HECM borrower behavior (number/percentage of maximum draws within one year following funding) will dictate if principal limit factors need to be lowered.

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