The Need for Private Lenders in Reverse Mortgage Market
[vimeo id=”70203274″ width=”625″ height=”352″]
For some veteran reverse originators the idea may be unsettling. For others it may be seen as a welcome relief. Reverse Mortgage loans without government backing. In other words the emergence of widespread private market reverse mortgages that are not federally insured. Will such a scenario arrive soon?
Considering the potential changes the FHA is thinking about, I would like to see private lenders get into the action and even take over the market share the FHA has. Many Seniors will get hurt if the FHA changes go into effect, so I believe private HECMs can fill in that gap.
Our only real experience with non-government reverse mortgages is with Jumbos which never really had much of a market to begin with…..they were a niche within a slightly larger mortgage niche, (reverse mortgages).
Also, they existed back about two PLF adjustments ago and we have at least one more to go in October so competing with HUD HECM’s has more hope now than before. Credit underwriting, escrow reserve accounts and draw limitations further level the playing field.
I hope we can get a look at the possibilities before some lender rolls out a surprise product that is as ill conceived, ill advised and unmarketable as the ones in the past. Especially the Financial Freedom so called Cash Account which was the only “conforming” hecm we’ve seen to my knowledge. It didn’t have a chance against a very generous HUD HECM. These decisions shouldn’t be made in a vacuum but generally are unfortunately.
I HOPE THEY RETURN ,,,,CLIFF
By the way, the products to date are:
FNMA Homekeeper, Jumbo
Bank of America, Independence Plan, Jumbo
Metlife, Reverse Select, Jumbo
Financial Freedom, Lifetime Plan, Jumbo
Financial Freedom Cash Account, the super mini reverse mortgage. (ill timed)
Generation , Jumbo. still kicking or at least still twitching.
Jumbo Reverse Mortgages are unimportant (irrelevant) at this stage so should not be considered when evaluating the future of private reverse mortgages. The potential volume simply is not there for Jumbos.
There are several others as well. There were two versions of them from KBC Bank through World Alliance Financial as well as the FLEX reverse mortgage from First Reverse. There was at least one proprietary jumbo offered through one insurance company who tried to hide their identity through a broker and only offered it wholesale.
There may have been still others. At one point during the peak someone at our offices tallied the number and it was over 12 by different companies.
“Is it possible? Almost anything is “possible” but is it probable? We may have to find out.
Last Friday (7/12/2013) the NRMLA Weekly Report email reported: “A financial services reform bill unveiled yesterday by House Financial Services Committee Chairman Jeb Hensarling (R-TX) would repeal the HECM program two years after its enactment.”
While the bill is unlikely to pass both chambers of Congress, it could pass the House as part of a larger bill. It is doubtful if the Senate would pass it or the President would sign it. However, just reading this proposal is quite startling. The one thing this bill shows is a strong negative vote on the confidence of the Committee in the ability of FHA to turn the HECM program around. That lack of confidence is understandable since for the last four years, the Committee has held hearing after hearing on the health of the MMI Fund with no indication from FHA that the losses from the HECM part of the MMI Fund were anything close to the net position it was as of last fiscal year end. Then to hear this fiscal year that FHA had the HECM program under control but would need additional powers to turn it around and then later that the size of the HECM negative net position would about double by the end of this fiscal year did not produce an air of confidence in the ability of FHA to turn the HECM program around.
This bill should be a wake up call to HUD that it cannot sit idly by and do some window dressing for a few years (transfer over $2.2 billion in funds from other MMI Fund programs) so that the HECM fund looks better at fiscal year end than it is, without disclosing their actions and their problems in both written reports to and in spoken statements in appearances before the Committee without strong reaction from it. The fixed rate HECM and its successor, the fixed rate Standard HECM were an awful failure and detriment to the HECM program. Worse, the FHA continued and unreasoned support for the fixed rate HECM and fixed rate Standard HECM was absolutely astounding. While it is understandable that the industry would support those products, the continued support of FHA in the face of increasing losses is incredible.
While few expect the HECM program will end soon, expect FHA to drastically change the program in the next few months whether FHA staff obtains their requested additional powers over the HECM program by the end of this fiscal year or not.
(The views expressed are not necessarily those of RMS or any of its affiliates.)”