An Unlikely Ally?

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The prospect of not continuing to offer reverse mortgages has created unlikely ally for the program, AARP according to Sterne Agee in his short research notes on Walter Investment Management.

This is substantial. One: Wall Street sees the continued profitability of the program and TWO: AARP is seen as a defender of the HECM. While AARP has long educated consumers about the reverse mortgage, they have also been an outspoken critic partnering with consumer advocacy groups…

 

14 comments

Larry D Armstrong January 4, 2013 at 6:29 am

The industry/our association has missed a very powerful opportunity to partner (in the past) with the National Association of Home Builders in working to strengthen the HECM value proposition with members of the House and Senate in Washington, D.C.
Clearly, they (NAHB) have a much stronger position on the Hill than our association has had in the past. Elected officials need to understand how both the traditional HECM and the HECM for Purchase can be key parts of a solution for older Americans to Age-In-Place in their own homes/communities…and/or rightsize/relocate to live independently and on their own – with less/no dependence on local, state and Federal government assistance. NAHB’s 50+ Housing Council can be a logical first step; given their placement within this powerful association, and its impact on Congress and the regulators.
It’s time to take this powerful message to our representatives and regulators… to assure our story is best told and we are part of the solution…not the problem!

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Nancy Pedone January 4, 2013 at 11:48 am

well said,Larry.

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Jim McCarron January 4, 2013 at 7:02 am

We must work to insure the most vunerable senior home owners still have access to these products. Credit qualifications and escrowed funds could/will discriminate against these folks. If restricted to one product or entire avilable princ limit draws may be necesary.

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Rebecca Bulkeley January 4, 2013 at 12:58 pm

As an Associate Broker and full time Realtor of the past 10 years, and as a holder of the SRES ( Senior Real Estate Specialist ) designation, I was thrilled to be able to help my clients by providing knowledge and partner solutions with the Reverse Mortgage product line.

The Reverse Mortgage product line is one vital tool to truly providing independence, health and well being to our respected senior citizens.

Realtors have the relationships. Let’s create a stronger partnership to ensure the Reverse Mortgage product line remains a strong alternative to seniors facing critical housing issues.

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James E. Veale, CPA, MBT January 4, 2013 at 6:08 pm

Ms. Bulkeley,

What a delight to read your comment. As a fellow licensed real estate broker here in California, I know you have paid a price to become a licensed broker. I am further impressed that you a SRES designated Realtor. Congratulations on your success.

Your kind words are greatly appreciated. Unfortunately our industry has not focused enough on SRES designated Realtors. We have a lot to learn from you as a group.

SRESs designees like you bring a lot of experience with seniors in home purchase transactions. As to the HECM segment of the mortgage industry, SRES designation holders are a group to work with.

Here is hoping that we can work together to provide seniors with better homes with as little accessible cash lost in the transaction as possible.

I look forward to hearing from you again in the future.

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Brien J Brandenburg January 4, 2013 at 3:00 pm

Outstanding report.
Will the HECM go back to what it was originally designed for?…
Thanks for all you do.

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Shannon Hicks January 4, 2013 at 3:16 pm

Thank you Brien. Let’s hope needs-based borrowers will not be completely left out in the cold.

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CLIFF RIDDLE January 4, 2013 at 3:57 pm

DON’T KNOW WHAT WE WOULD DO WITH OUT YOU,,THIS IS WERE I GO FOR THE ANSWERS ,,,,,,,THANKS,,,,,,,,,,CLIFF

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Shannon Hicks January 4, 2013 at 3:58 pm

Cliff. That is very kind of you. I am both honored and humbled. Thanks again.

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James E. Veale, CPA, MBT January 4, 2013 at 6:32 pm

Some embrace change; some do not. While no one likes the most likely revenue impact, the future of the industry still remains in peril, if eliminating the fixed rate HECM does not stop the bleeding. HUD tried to fix the problem in both fiscal 2010 and 2011 by infusing over $2.2 billion in funds into the HECM portion of the MMI Fund and could not fully rectify the inherent problem contained in the endorsements since 9/30/2008.

The actual size of the problem is currently measured at about $6 billion which is the total of the net of liabilities over assets held in the HECM portion of the MMI Fund at the end of last fiscal year ($2.8 billion) plus the funds HUD has pulled from other parts of the MMI Fund into the HECM portion of the MMI Fund and lost earnings on that over $2.2 billion to those other parts and then there is still the need to have the positive 2% balance required by Congress. Add it all up and the HECMs endorsed in the last four years have been disastrous to the MMI Fund. Unfortunately most of those HECMs were fixed rate Standards.

Ms. Galante, the new FHA Commission, is doing the right thing and I fully support her in it. While I will hate the result, the need is obvious and a necessity.

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James E. Veale, CPA, MBT January 4, 2013 at 7:20 pm

Shannon,

I have heard you use and have read RMD state that the fixed rate HECM is being suspended yet I cannot find that word ever being used by Ms. Galante. The section addressing the change in her letter to Senator Corker is titled using the word moratorium but then the words specifically used when it comes to fixed rate Standards are cessation and eliminating their use.

Can you cite where the word “suspend” appears in any of the statements or writings of Ms. Galante when it comes to fixed rate HECMs? That word gives some hope of its return.

Thanks and have a great weekend.

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Jeffrey Avella January 5, 2013 at 7:16 am

Some or you may remember a name Ken Scholen,and the reason I bring his name up is to revisit a time when the new program arrived on the scene “reverse mortgage” well Ken sa it as a “New Nest Egg,a program to address the senior homeowner who wanted to get cash from the Home without selling it and not be required to make monthly mortgage payments.The program had security,flexibility and was backed by FHA.The uses were many,pay off exisiting debt,emergency fund,home repairs,property taxes,reserve fund,paying for health care.SAee it as a well thought out strategy for many seniors who were living on fixed incomes and were not seeing a return from public sector programs IE:SSI and Medicare.Fast foward to today,a world away with fast moving markets,overexposed and under scrutiny daily,a govt growing and losing site of common sense solutions.The once small niche program has become a pawn in the game of politics, and oversight committee’s.I Looking back to reports,,say one I have from 1995 Ramussen FNMA report on Reverse mortgages,using life cycle models,asset management perspective and demand for the program,points in a favorable direction and statistically makes the case for the use and growth of such a program.Lost in translation, yes push/pull between private sector and govt yes,simply the senior needing clarity on options,all need to be reshaped to move in a positive direction.I strongly believe our once niche program that Ken Scholen called Your new retirement nest egg became swept up in a cloud and well with similar passion like ken had and this audience of professionals we can reshape,refocus and make the main thing the main thing..alot of work yes but worth it yup!

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James E. Veale, CPA, MBT January 7, 2013 at 9:41 am

Mr. Avella,

Your view and mine are very, very different. This is not a nest egg. It is debt.

The nest egg concept has resulted in some seniors seeing their HECM as a sale of the home to the bank.

Here are the primary purposes of the program per Congress:

“§1715z–20. Insurance of home equity conversion mortgages for elderly homeowners
(a) Purpose
The purpose of this section is to authorize the Secretary to carry out a program of mortgage insurance designed—
(1) to meet the special needs of elderly homeowners by reducing the effect of the economic hardship caused by the increasing costs of meeting health, housing, and subsistence needs at a time of reduced income, through the insurance of home equity conversion mortgages to permit the conversion of a portion of accumulated home equity into liquid assets; and
(2) to encourage and increase the involvement of mortgagees and participants in the mortgage markets in the making and servicing of home equity conversion mortgages for elderly homeowners.

(c) Insurance authority
The Secretary may, upon application by a mortgagee, insure any home equity conversion mortgage eligible for insurance under this section and, upon such terms and conditions as the Secretary may prescribe, make commitments for the insurance of such mortgages prior to the date of their execution or disbursement to the extent that the Secretary determines such mortgages—
(1) have promise for improving the financial situation or otherwise meeting the special needs of elderly homeowners;
(2) will include appropriate safeguards for mortgagors to offset the special risks of such mortgages; and
(3) have a potential for acceptance in the mortgage market.”

It is (c)(2) which directly conflicts with the concept of a nest egg and is in part why the program and borrowers are in the mess they are currently in. While the nest egg concept is great when it comes to marketing, it has little relevance when it comes to “the special risks of such mortgages.”

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Jon Sias January 5, 2013 at 5:15 pm

Seems to me a critical key will be a recognition by the Brass and membership committee at NRMLA that our industry lacks the congressional clout of bankers and real estate brokers because it lacks membership support from the vast majority of mortgage brokers and originators. Shannon, we are all in your debt for your diligence.

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