A Time for Measured Optimism?


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Despite challenges there is reason for measured optimism

reverse mortgage newsIf you’ve been originating reverse mortgages for longer than a few weeks or paying attention to recent developments you’ve probably felt the impact of our collective dependence on a singulargovernment-insured loan and heard the dire warnings of a continued decline in loan volume. But not unlike most drastic proclamations of doom and gloom the truth lies between the extremes.

All which brings us to the question- is the reverse mortgage or HECM market in a continued downward trajectory? The number of FHA case number assignments issued for new HECM applications serves as an accurate leading indicator of consumer interest in the loan. The average number of HECM case numbers issued in both 2016-17 averaged nearly 7,000 per month.  Predictably case numbers plummeted after last September’s rush to beat October 2nd HECM cutbacks in the wake of a record 20,408 new applications. Yet despite this aberration today application volume is steadily climbing an average of 9 percent in the first 3 reported months of 2018. Interestingly, if that trend were to continue

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Uncertainty, Hope & Expectations


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Despite challenges there is reason for measured optimism

While we are seeing positive indicators in the reverse mortgage industry such as Mutual of Omaha’s recent entry into the market, many are concerned in light of significant declines in loan volume following HUD’s October changes to the Home Equity Conversion Mortgage. What is a realistic outlook for the HECM marketplace? What potential changes should we be mindful of?

Ironically with more American’s lacking adequate funds to retire the federally-insured reverse mortgage’s popularity has plummeted. Realistically, barring any further significant changes, we should anticipate slow but steady growth in the short term. In the short term, we can anticipate further consolidation. One significant and positive sign is the confirmation of Brian Montgomery as FHA Commissioner. Most notable is Montgomery’s support of moving the HECM out of FHA’s MMI Fund and back into the General Insurance/Special Risk Fund. This is key as each fund is treated differently when it comes to accounting and appropriations…

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A Rising Tide Lifts All Boats

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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.

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Do We Have It All Wrong?

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There’s a Silver Lining in HECM Endorsements That is Overlooked

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The chorus of dismay from reverse mortgage professionals lamenting declining reverse mortgage loan numbers began after the Great Recession and continues through today. Consequently, a sense of frustration and futility has set in for some who believe our industry was decimated in the aftermath of the housing crash, product restrictions and the Financial Assessment. But do we have it all wrong? In other words when considering HECM endorsement volumes are we comparing apples to oranges? Do mere annual sales numbers reflect the true state of our industry?

Jim Veale is more than an industry veteran- he’s a numbers guy. Not surprising considering his background as a CPA with a Masters in Business Taxation. While often outspoken on industry issues, Jim has been my personal go-to guy when it comes to the more technical aspects of the HECM market. His recent Op-Ed in Reverse Mortgage Daily does not disappoint.

“Most sales managers, originators, and other participants in the Home Equity Conversion Mortgage industry are longing for significant validation that the sales efforts of this decade have had any meaningful results.

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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HECM Terminology is Confusing at Best

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Our Name & Terminology May Be Turning Away Potential Borrowers

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Principal Limit Factor? Really?!

“Words have meaning and names have power”, said Spanish author Miguel de Cervantes. Perhaps this is something the reverse mortgage industry should strongly consider. The 27-year-old Home Equity Conversion Mortgage program is struggling to expand its reach in an ever-growing marketplace. Is our reverse mortgage terminology confusing older homeowners? Does our name need to be rebranded?

For many years I have chafed at the term ‘reverse mortgage’ opting instead for Home Equity Conversion Mortgage, considering widespread product confusion and lingering misgivings born from negative media stories. Even better perhaps we should adopt “Equity Release Mortgage” as our new flagship name as our counterparts in the U.K. and Australia have branded a similar offering. During the NRMLA annual meeting in Chicago, some members argued that the name “reverse mortgage” carries a negative connotation, in the sense that a person is moving “backward”. Create your own user feedback survey

Beyond the argument that our product needs a new name, is the confusing and often contradictory terminology in the HECM itself. The principal limit, while known within our industry, is completely foreign and alien term for older homeowners who have only been exposed to standard mortgage terminology in their working years. Some industry members argue that ‘available proceeds’ is more descriptive. Maximum Claim Amount, or MCA, is another example of industry jargon thrust upon HECM borrowers. Instead, some suggest renaming this to the ‘FHA Lending Limit’. The fact is that mortgage applications are loaded with an alphabet soup of acronyms. With HECM loans layering another set of loan terms, confusion is sure to follow, not to mention increased consumer uncertainty…

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An Identity Crisis for the HECM?

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reverse mortgage newsThe HECMs identity, purpose, and true intent

Anyway you slice it, the reverse mortgage industry is struggling to get back on a positive trajectory. Not surprising considering the glut of regulatory changes and product revisions we have absorbed in recent years. The silver lining is the immense market potential that lies ahead. The uncertainty lies in the question, what will the HECM program look like in the future?

Beyond regulations, product changes and product restriction we face another quandary, a crisis of identity and purpose. Much of the HECM’s identity crisis can be attributed to our traditional needs-based borrower of yesteryear…

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More or Less? That is the Question



A Dispassionate Examination of the HECM

Reality-CheckWe’ve all heard the predictions. The industry will bounce back to 100,000 endorsements per year, the baby boomer wave will spur industry growth, etc. A recent article on CNBC’s website predicts that retiring baby boomers will spark reversemortgage demand. Truth be told, reverse mortgage demand may increase but our industry’s volume will most likely not keep pace with the increasing need of future retirees.

A dispassionate analysis of the reverse mortgage program reveals some striking similarities to the traditional mortgage market. Generous lending guidelines combined with growing consumer demand create a boom to bust cycle. During the mid 2,000’s, the reverse mortgage program gained historic momentum as the product was pushed into the public consciousness. The HECM bubble was fueled by…

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Looking for more reverse mortgage news, commentary, and technology? Visit ReverseFocus.com today.