History- You’re Living It

Imagine it’s 1956 and you are writing your first 30-year fixed-rate mortgage as a loan officer working for your local bank. It was a historic period in home financing as most mortgages up to that time had 20 year amortization periods until the Federal Reserve began significantly increasing interest rates. In the effort to keep home financing affordable despite higher rates the Federal Housing Administration broadly adopted what is now the gold standard of mortgage lending- the 30-year fixed.

Today we find ourselves in the historic moment of the COVID-19 pandemic which has left many sectors of our economy closed, partially opened, or closed again. This modern-day plague has instilled a strong sense of insecurity in many, especially retirees. However, history has taught us that disease and economic upheaval are found throughout written history.  The Roman Emperor Marcus Aurelius wrote the following during the Antonine Plague. “To bear in mind constantly that all of this has happened before and will happen again—the same plot from beginning to end, the identical staging”.

Just as the Fed’s continued interest rate hikes in the 1950s spurred innovation and public acceptance of the 30-year mortgage, economic uncertainty is moving many undecided homeowners to reconsider a reverse mortgage- or at least to put their guard down momentarily to research how the loan works. Uncertainty and need are still two of the common motivators in getting a reverse mortgage.  It then comes as no surprise that counseling agencies find themselves struggling to find available slots for required borrower counseling- not surprising since FHA case numbers issued have surged to a record number HECM applications recorded in the months of March, April and May when compared to recent years.

Another historical shift we’re experiencing is how quickly older Americans are embracing remote meeting technology to stay in touch with family and friends while ‘social distancing’. Grandma and Grandpa are highly motivated to see their grandchildren’s smile and interact on a more intimate level than merely a phone call. Consequently, the resistance to using teleconferencing services such as Skype, Zoom, or Google Meet has dropped considerably. Reverse mortgage professionals have seized upon this shift offering remote appointments and ‘touch-less’ loan closings.

While useful in times of relative economic stability reverse mortgages are absolutely essential as long term financial outlooks are clouded by concerns of inflation, a volatile stock market, and investment losses. Will the general public suddenly embrace reverse mortgages just as they adopted the 30-year mortgage 70 years ago? Don’t go placing your bets in Vegas just yet. However, the present moment in history we share provides the occasion to make inroads with homeowners and financial professionals alike- both who’ve been harshly reminded that the only thing that’s certain in life is uncertainty itself.

A Rising Tide Lifts All Boats

ePath 100K RM leads

An improving economy and housing market have the HECM poised for growth

 

reverse mortgage newsIf you have been originating reverse mortgages for over ten years, congratulations. You survived the Great Recession and housing crash of 2008 and lived to tell the story. While some are concerned we are entering another housing bubble, the good news is that home values in several markets have reached new highs that set in 2006. Despite the controversies swirling in the wake of the presidential election economic growth accelerated to an annual rate of 2.6% from April to June according to government statistics. With an ever-growing need to fund retirement, a modest growth in the GDP, and increased consumer confidence, will a rising tide lift all boats?

Measuring success and potential market growth is a tricky business where hindsight is truly 20/20. Looking back at the pre-recession boom in reverse mortgage growth and housing prices alone would be akin to one comparing their high school 100 yard dash times to their speed in middle age. As mentioned last week, our industry’s loan volume, and the prospects of economic growth for that matter must be viewed historically.

Download the video transcript here.

The Sky Is Not Falling with Interest Rate Hikes

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Interest rate hikes are here. How to cope?

reverse mortgageThe Federal Reserve has already increased the benchmark federal funds rate and has telegraphed their intention for additional hikes this year. Do reverse mortgage lenders and borrowers need to worry?

Be careful what you wish for. Monetary policy dictates that as the economy improves, interest rates are adjusted to more normative levels in the efforts to curb inflation and prevent market bubbles triggered by cheap money.

Reverse mortgage borrowers reluctant to pay higher closing costs were often won over with lender pricing concessions. IBIS’s weekly rate updates show the gradual erosion of lender margins, eroding the ability of HECM lenders to reduce origination fees or to cut other costs….
Download the video transcript here.

Insurance fund for RMs looking healthy: Industry Leader Update

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HUD Secretary says fund backing reverse mortgages looks good…

The lackluster condition of of the Mutual Mortgage Insurance fund in fiscal year 2010 lead to some sweeping changes which included a reduction of principal limit factors, an increase of ongoing FHA insurance and the introduction of the Saver.

What changes can we anticipate when the insurance fund’s actuarial report is released this November if any? The housing market aside there are factors that have improved the overall financial health of this fund which backs federally-insured reverse mortgages.