Big Changes Ahead in 2017

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3 reasons why you should expect big changes in 2017

The political landscape changed with a sudden seismic shift felt across the world. Domestically the impacts of a new populist, small government philosophy may manifest themselves in a variety of ways that will impact reverse mortgage lending this year.

Slashing Domestic Spending:

The Trump administration is contemplating substantial cuts in excess of $6 billion dollars from HUD’s budget, according to documents obtained by the Washington Post. While alarming to some, would such cuts, if realized, substantially impact the Home Equity Conversion Mortgage? The short answer is no as most are speculated to be directed at housing initiatives such as Section 8, community housing projects and assistance programs for elderly low income Americans. Some industry participants however, wonder if continued budget subsidies for the HECM program would place the program in the crosshairs of the federal government’s efforts to reign in domestic spending.

reverse mortgage newsTrump vs. The Fed:

Will Trump regret his comments about the Fed? Throughout his presidential campaign, Donald Trump criticized the Federal Reserve and it’s chair Janet Yellen, of maintaining artificially low interest rates to help Hillary Clinton. In December the Fed raised interest rates on quarter of a percent, the second rate increase since June 2006. Central banks have been reluctant to raise interest rates in the wake of the 2008 financial crash, and home prices have consequently been on a tear. Today, the Fed is projecting three rate hikes this year alone. The impact would be felt by

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NEW HECM Rules Announced

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HUD Announced New Finalized HECM Rules for 2017

reverse mortgage newsHUD announced their finalized rules enacting several policy changes to the Home Equity Conversion Mortgage (HECM) program which will go into effect later this year. What do these changes hold in store for interest rate caps, disclosure requirements, and new loan assignment guidelines and how will the final rules change the face of reverse mortgage originations? Welcome. This, is the Industry Leader Update. I’m Shannon Hicks.. This episode is brought to you by ePath Digital, providing real-time leads for today’s reverse mortgage professional.

After much anticipation and speculation, HUD announced their finalized rule changes for the Home Equity Conversion Mortgage. The rule changes were first proposed and opened to public comment last May. The rules could be seen as a continuation of the agency’s mission to solidify the reverse mortgage program under the Reverse Mortgage Stabilization Act of 2013 which gave HUD expanded authority to quickly enact additional rule changes as they saw fit. The new rules will go into effect September 19, 2017.

When it comes to reverse mortgage originations, loan officers and lenders will be required to…

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Are More HECM Reforms Needed?

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Are More Rule Changes Needed or Does Data Need to Be Reexamined?

The new year is upon us and we can leave 2016 in the rear view mirror, with the exception of HUD’s pending reverse mortgage rules. Are additional HECM reforms truly needed to strengthen the HECM program?

loading-iconIn the wake of the election and the new year, lingering HECM program changes can be easily forgotten. Last May FHA introduced a series of new rules to strengthen the Home Equity Conversion Mortgage program. The changes included required HECM counseling prior to signing s mortgage contract, disclosure of all HECM features and options, and most problematically, a 5% lifetime cap on the adjustable rate HECM with a 1% annual interest rate cap. Numerous industry participants and the National Reverse Mortgage Lenders Association submitted inputs to the agency in the Federal Register. Several months have passed and yet there is no word if these substantial product changes will be enacted. Presently the proposed rule changes are in the final rule stage prior to regulatory review.

Many industry participants have voiced their concern that these changes will negatively impact the HECM program. Perhaps a more relevant point is the question if such changes are even necessary. Is the HECM program’s economic outlook as bleak as HUD’s recent report to Congress suggests?

HUD’s most recent report to Congress shows the HECM portion of FHA’s portfolio is valued at a negative $7.7 billion dollars. That represents a $13 billion dollar swing to the negative dropping from the previous year’s valuation of a positive $6.8 billion. Much of the impact can be attributed to slowing home appreciation upon which much of the economic modeling depends upon.

However, what is somewhat problematic are reports that HUD’s internal assumption are based on 100% of the available principal limit is used at the beginning of the loan. This assumed front-loaded loan balance is then factored based on future interest rates and the borrower’s age. This mathematical approach drastically increase the negative amortization of the HECM loan and the assumed ending loan balance…

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The Myth of Reverse Mortgage Foreclosures?

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Guttentag Questions the Definition of a HECM ‘Foreclosure’

“Whoever controls the language controls the debate”. The purported ‘epidemic’ of reverse mortgage foreclosures has long been a staple for major media outlets to attack the reverse mortgage as a risky and dangerous loan. Closer to home, the incidence of HECM foreclosures has been often cited as one justification for increased restrictions, product reengineering, and the financial assessment underwriting guidelines.

Jack Guttentag -"The Mortgage Professor"
Jack Guttentag -“The Mortgage Professor”

The media loves a good drama. Find a villain and add some emotional tension and you have a headline that is click-worthy. Such a scenario played out in a recent article on Bloomberg.com entitled “Mnuchin’s Reverse Mortgage Woes Blemish Record of Treasury Pick.” Jack Guttentag, aka the Mortgage Professor, was intrigued. The headline is timely since Steven Mnuchin was recently announced as president-elect Trump’s pick for Treasury Secretary. Mnuchin’s blemish in the article centers on his acquiring of IndyMac Bank in 2009 and with it Financial Freedom. Now we can see the ‘reverse mortgage’ connection that Bloomberg hints may point to alleged unethical business practices. Financial Freedom “has carried out 16,220 foreclosures since 2009, or about 39 percent of the country’s reverse mortgage foreclosures, according to HUD data obtained by the California Reinvestment Coalition…” Guttentag was skeptical that one lender could account for such a large percentage of HECM foreclosures.

What ‘foreclosure’ really means

Skeptical, Guttentag researched for the total number of HECM foreclosures since 2009. He uncovered a report provided by the agency to a consumer group in response to a freedom of information request. Since April 2009, there have been 41,237 reverse mortgage foreclosures accounting for roughly 4% of all…

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Sacred Cows



HECM Line of Credit (Principal Limit) Growth Rate in AARP’s Crosshairs

reverse mortgage newsSacred cows. Those tenets or beliefs that have been long held above reproach and which are seen as immune from criticism. For the Home Equity Conversion Mortgage, one benefit has been largely left unscathed, that is until now. AARP is recommending the elimination of the principal limit growth factor, or as many refer to it the credit line growth rate feature.

There are many competing and cooperating opinions that are voiced when HUD makes revisions to the federally-insured reverse mortgage program. Industry stakeholders, trade groups and consumer advocacy groups. While all groups stated goal is to serve the needs of aging homeowners, the proposed policies have profound differences in implementation, and most importantly on the future appeal and accessibility of the HECM to future borrowers…

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Where Do We Go from Here?

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RMD Interviews NRMLA president Peter Bell on Industry Outlook and change 

If you want an example of rapid industry change look no further than the Home Equity Conversion Mortgage program.

where-we-go

Recently Reverse Mortgage Daily interviewed Peter Bell, president of the National Reverse Mortgage Lenders Association or NRMLA seeking insight on the recent spate of changes to the HECM program and our industry’sfuture.

First RMD asked- given the Financial Assessment is underway and the non-borrowing spouse issue seems to be getting resolved, how would you classify the footing of the Reverse Mortgage program right now relative to other points in history?

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