The Coming Revival?

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Our Industry’s Market Opportunities & Challenges

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As a child growing up in the pentecostal church I often heard adults speak in hushed tones about the coming revival. Good things were just right around the corner. As I grew older I realized the promise of revival was a motivation for the faithful to endure despite present circumstances. Similarly there are more stories, rumors and hopes that the reverse mortgage industry will experience it’s own revival in the coming years. An article last Monday in Reuters entitled “U.S. retirees return to reverse mortgages, big banks stay away” addresses the baby boomer wave and the increasing need to fund retirement. It opens with “U.S. baby boomers desperate for retirement income are increasingly turning back to a financial product that, after the housing bust, had been left for dead…

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The Art of Survival

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The Skills Needed for Surviving the Age of Change

reverse mortgage newsBeyond keeping up with product and regulatory changes is remains the difficult task of doing business in the brave new world of reverse mortgage lending. Originators are feeling the impact with fewer borrowers qualifying due to lower principal limits or lending ratios while lenders seek to adjust to lower revenues in the wake of HUD’s eliminator of the  standard fixed rate’s loan.

Much of the pain can be attributed to the protracted process of redirecting our focus to a new demographic. Case in point, the typical needs based borrower. These individuals are most vulnerable to not qualifying due to…

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A Bright Future

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Professor Sees Reverse Mortgages as a Cornerstone for Retirement Planning

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It’s no small endorsement. Well known Columbia Business school professor Christopher Mayer not only sees a bright future for reverse mortgages but he’s going into business himself. Mayer is tapering his teaching responsibilities at Columbia to serve as CEO of the startup reverse mortgage lender Longbirdge Financial….

 

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What Lies Ahead?

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 What Can We Expect in 2014?

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With the changes and permutations the HECM program has undergone since 2010 one could argue we have already undergone a makeover of sorts. The Saver program, HECM for Purchase and the introduction and revocation of the standard fixed rate. True. However HUD’s recent revamp of the program stands apart as it’s first and only change that is a hard push back to the program’s original intent…to help senior homeowner’s age in place. The Saver gaves us increased crediability with lower costs and opened doors in the financial community. The HECM for Purchase expanded our legitimacy amongst real estate professionals and builders while the fixed rate maximized proceeds while securing interest rates. With recovering home values and a consolidated product what does 2014 hold in store? Here are just a few  speculations on what we can anticipate.

#1- New marketing. While the traditional reverse mortgage ads of the past increased public awareness of the reverse mortgage product, they have also attracted detractors concerned the typical message attempts to lure seniors with promises of vacations, luxury purchases and a flush retirement lifestyle. That may be a stretch yet it warrants our attention. In 2014 expect to see new and creative campaigns focusing on the HECM’s role in retirement planning versus cash alone. Will this attract a more affluent borrower? Time will tell.

#2- Further lender consolidation. We have already seen some medium sized lenders exit the space since last October. Expect a few remaning key players to step to the sidelines in the coming months. Today’s lending environment presents particular challenges to smaller shops with increased regulatory and compliance costs.

#3- Tenure, the loan de jour. Just as the Standard Fixed rate was the rage expect lenders and loan officers to begin promoting the powerful flexibility and growth potential of deferred tenure payments or a line of credit. Though some have lamented the loss of the standard fixed this new product landscape will convert many back to presenting the HECMs true flexibility and long term value when structured properly.

 

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For more Reverse Mortgage news, technology & training visit ReverseFocus.com.

2013: A Turbulent Year

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A Look Back at a Bumpy 2013

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For reverse mortgage professionals 2013 will go down as a bumpy ride. And what a ride it has been. In the last ten years I cannot recall a year with more substantial and industry-changing developments. 2013 was rang in with HUD’s announcement they would be ceasing the problematic Standard Fixed Rate Product. While it helped many borrowers who needed maximum proceeds to payoff existing mortgage balances it also added to FHA’s risk of future insurance payouts from its Mutual Mortgage Insurance (MMI) fund. One look at the amortization chart of a fixed rate loan with the full upfront distribution and it didn’t take a mathematician to figure out  substantial risk was baked into the fixed rate loan. Unfortunately generous payouts in loan compensation unduly influenced some originators where a more flexible adjustable rate loan may have been more fitting.

While politicians may be adept at spending money they are also politically astute knowing a faltering FHA Home Equity Conversion Mortgage program required some painful changes lest they incur the wrath of watchful policymakers and voters. HUD asked for and received the authority needed to make program changes witht the passage of the Reverse Mortgage Stabilization Act which led to product consolidation. After eliminating the standard fixed rate in April HUD moved to eliminate the standard adjustable and both saver loan programs altogether in favor of one two-tiered product.

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For more reverse mortgage news, technology & training visit www.ReverseFocus.com

Good Intentions vs Original Intent

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Though Unwelcome Change was Crucial

Watch Last Week’s Video Here  |  Submit Feedback to HUD on Financial Assessment Here
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Reverse Industry Change

The Importance Of Intent In The Reverse Mortgage Industry

The saying goes “the road to hell is paved with good intentions”. The same could be said of the federally-insured reverse mortgage program’s recent predicament and HUD’s swift action to avoid disaster…the closure of the program. Much of the recent reverse mortgage news has focused on the announced overhaul of the Home Equity Conversion Mortgage Program, but few look at or understand it’s original intent. The words original intent are fitting when examine the origins of our program versus its evolution over the last 24 years. The Housing & Community Development Act which laid the groundwork for the reverse mortgage program says the purpose is “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.”

FHA to Reexamine MMI Fund Projections

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A Second Look at MMI Fund after Program Changes…

BREAKING:Read Mortgagee Letters 2013-27 & 2013-28 for complete details of changes.

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Mutual Mortgage Insurance Fund A second look at the Mutual Mortgage Insurance Fund is exactly what FHA plans do to after setting the wheels in motion for historic changes to the reverse mortgage. Yes, after committing to eliminating both the Standard and Saver product in lieu of a new one FHA wants another look. It all began in November 2012 when an Actuarial review of the MMI fund found that the reverse mortgage portion accounted for a negative 2.8 billion dollar economic value. Economic value is a better description than losses for these are projected losses based on actuarial analysis and data. In other words, with home values that fell this percent and projected loan balances and appreciation the fund would pay X dollars. Early figures showed the HECM portion of the fund accounted for 2.8 billion in projected losses of the 16 billion dollar overall future shortfall. Later that figure was revised to show projected losses from reverse mortgages totaling $5.2 billion. The dire numbers were too unsettling to ignore. So why the second look at the fund at this stage?