Examining the HECM’s Viablity

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Truth be told, the HECM is not the only loan that is dependent on the government

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The United States is in the mortgage business and in a big way. I have had to repeatedly remind myself that Uncle Sam’s reach in mortgage lending goes far beyond Home Equity Conversion Mortgages. At times many reverse mortgage professionals may lament our industry’s near total dependence on the federal government when in reality the majority of the housing market is regulated and ultimately backed by the taxpayer. The HECM is no exception.

This point should not be overlooked when considering the recent news that President Trump issued a memoranda instructing the Department of Housing and Urban Development to report back on the financial viability of the HECM program. A proposition that has caused considerable concern. It’s not a shocking development being mindful the program has generated significant claims since being moved to FHA’s Mutual Mortgage Insurance fund in 2009. Subsequently, FHA officials have wrestled with just how to stop the continuous stream of…

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Trump to HUD: Examine Viability of HECM Program

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The HECM tops the list of Trump Administration’s HUD reforms

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President Trump has directed HUD to examine the ‘viability’ of the Home Equity Conversion Mortgage and to take other steps to strengthen FHA and the housing GSE’s Fannie Mae & Freddie Mac…

HECM Changes in 2019: Inspector General’s Report Provides Clues

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Inspector General report points to specific risks

reverse mortgage newsIn October HUD’s Office of the Inspector General released their report which telegraphs what changes to the HECM we may see in 2019.

If you were to ask ten HECM professionals what their outlook was for 2019, you would likely get ten different answers. Of all the responses one were to receive the most honest and realistic would be- expect more change.

There’s been much talk in the media of Inspector Generals recently- most of it centered on the political war that rages in the wake of alleged Russian collusion in the Trump administration and also the Inspector General (IG) investigations into the Department of Justice and the intelligence community. However, what most may not know is that all major federal agencies have a functioning IG who serve as watchdogs to ensure that the best interests of the government and taxpayers are served. On October 15, 2018, the U.S. Department of Housing and Urban Development Inspector General’s office released their report outlining 6 challenges facing the agency.

Of the six the most troubling and problematic are the continued risks to FHA’s Mutual Mortgage Insurance fund, which backs both HECM and traditional FHA loans. The OIG states that HUD is presently lacks sufficient safeguards to prevent loan servicers that fail to meet foreclosure and conveyance deadlines from incurring holding costs which are passed onto HUD. It is estimated these delays cost the agency $2.23 billion in ‘unreasonable and unnecessary’ holding costs in a five year period. While not specifically mentioning HECMs it’s not a stretch to believe these issues plague both traditional and HECM loans. This comes as no surprise considering our recent report and an article in HousingWire which reveals a number of illegitimate occupants continue to remain in properties with a reverse mortgage; many times years after the borrower has moved, passed away, or in some cases even rented the property to another party. In other instances, heirs have reported considerable delays in getting a deed in lieu of foreclosure processed or waiting over 5 months for an appraiser to come to the property so the family can arrange for a purchase. While noncompliant occupancy of HECM properties is not specifically addressed, the report does cite delayed property claim reporting by servicers and/or lenders.

There’s no question that the HECM is flashing brightly on the radar of government watchdogs as evidenced in the report which reveals large losses attributed to the reverse mortgages… [download transcript]

NRMLA Recap: Commissioner speaks to industry- More Changes Coming

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FHA Commissioner, Proprietary Reverse Mortgages, and Market Branding highlight 2018 NRMLA Annual Meeting

Despite a year of setbacks for many, the 2018 National Reverse Mortgage Lenders Association Annual Meeting not only signaled a retooling of our industry but the course that lies before us. 
[there is no video transcript for this week’s episode]
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Senators Vow to Block All Nominees


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A long-term perspective of HECM endorsement volume

Our nation’s capital is often referred to as the swamp in part for its political factions, bureaucratic battles and interagency turf wars. Recently two U.S. senators recently vowed to block any nominees for several key vacancies at the Department of Housing and Urban Development. Senators Tammy Duckworth and Dick Durbin-both Democrats- vowed to put a hold on all HUD nominees, including the appointment of Brian Montgomery as Commissioner of the Federal Housing Administration. The Senators sent a letter to HUD earlier this month requesting a response no later than April 18th.

“As long as hundreds of Illinoisians’ lives are stuck in turmoil because of rash decisions that HUD fails to effectively or fully explain, I will object to every nominee Donald Trump sends our way,” said Senator Duckworth. Some of the agency’s current vacancies include the FHA commissioner, secretary of policy development and research, and the secretary for public and Indian housing.

At the root of the debate is HUD’s recent announcement to close two public housing developments in Thebes, Illinois. The agency said they do not have the funds to fix them. What most don’t know is that HUD does not directly manage public housing properties but rather relies on local housing authorities. Enter the Alexander County Housing Authority. In early 2016 allegations surfaced of…

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NEW HECM Final Rules Begin Sept 19th

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reverse mortgage newsHECM Final Rule Changes Begin Tommorw- Part 2: Interview with RMI’s John Lunde

HUD’s HECM Final Rules go into effect tomorrow (9/19/2017) and include in part:

    1. For fixed rate HECMs, only a full-funded LESA may be used.
    2. Partially funded LESA’s will distribute LESA funds two times a year to the borrower for the payment of property charges. Fully funded LESAs will directly pay the insurance or taxing authority, not the borrower.
    3. Initial distribution limits will remain in effect for the first 12 months, but cannot be reduced below a 50% distribution cap without additional rulemaking.
    4. Sellers are allowed to pay fees required to be paid by the seller under local or state laws, including the purchase of a home warranty policy.
    5. The seasoning of non-HECM liens looks at the 12 month period prior to the HECM closing.
    6. HELOCs (home equity lines of credit) are excluded from the 12-month seasoning requirement but are subject to first-year distribution limits.
    7. All HECM products and features must be disclosed to the borrower in a manner that is acceptable to the FHA Commissioner, regardless of the products offered by the particular HECM lender.
    8. Borrowers may lock in their Expected Interest Rate (EIR) prior to the date of loan closing or lock in their rate on the day of closing.
    9. The payoff of unsecured debts not secured by the property as defined by the Commissioner is a mandatory obligation.

GET FULL OFFICIAL TEXT OF FINAL HECM RULES HERE
John Lunde is the president and founder of Reverse Market Insight (RMI). They closely track the reverse mortgage (HECM) industry data points and trends.

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HECM Changes: Followup Q&A with Survey Results


reverse mortgage newsFollow up on two biggest questions on HUD’s changes to HECM

We had over 700 participants in last week’s webinar discussing HUD’s dramatic changes to the HECM program. Two of the most popular questions are answered along with the surprising results of our in-session surveys.