Breaking News: FHA Releases Four New Mortgagee Letters

The FHA released four new mortgagee letters late last week that will have a significant impact on the way appraisals will be conducted in the future. Although the mortgagee letters will not go into effect until January 1, 2010, they will cause some of the following significant changes to occur:

- Reduce the amount of time an appraisal remains valid to four months from six months.

- Clarify rules regarding what happens to an appraisal when the borrower changes lenders.

- Reaffirm rules regarding appraiser independence, while adding some new requirements, including the lender’s responsibility for ensuring the correct appraiser is listed in FHA connection, and preventing the lender from using any appraiser who is selected, retained, or compenstated in any manner by the mortgage broker or any member of the lender’s staff who is tied to the loan on a commission basis.

The fourth mortgage letter, while not directly relating to reverse mortgages or appraisals, requires all FHA mortgagees to submit an annual audited financial statement.

Copies of all the letters can be found below. While reducing the amount of time an appraisal is valid to four months from six months could add an expense to borrowers when a loan gets held up in processing, hopefully the change will add some urgency to processing reverse mortgage loans in a timely fashion and will allow borrowers to get a more realistic appraisal in a rapidly changing housing market.

Mortgagee Letter 09-28

Mortgagee Letter 09-29

Mortgagee Letter 09-30

Mortgagee Letter 09-31

Reverse Mortgage Guides Launches Section for Reverse Mortgage Lenders

Reverse Mortgage Guides is pleased to announce the launch of a new section of the site entitled, “Tools for Lenders.” The Tools for Lenders section includes tools for reverse mortgage lenders and loan officers, as well as for those wishing to enter the reverse mortgage industry. Some features include:

- a free downloadable reverse mortgage calculator

- a reverse mortgage industry job board

- a link to the industry news section of Reverse Mortgage News

- an article with advice on how to get started in the reverse mortgage industry

We expect the section to continue to grow in the future, and welcome feedback as to what you would like to see in the section. In addition, we have decided to open the section to advertising. If you are interested in advertising within the lender section, contact reva.minkoff (at) reversemortgageguides.org.

A link to the section can be found in the footer of nearly any page on Reverse Mortgage Guides.

Countrywide Can Be Sued by Investors, Rules Federal Judge

A federal judge in Manhattan ruled yesterday that the Helping Families Save Their Homes Act of 2009 did not exempt Countrywide from investor lawsuits. Countrywide had argued that the federal legislation automatically voided its pledge to buy back loans from investors if those loans were modified for troubled borrowers. The Helping Families Save Their Homes Act of 2009 was meant to help encourage servicing companies to modify loans, in part by providing some protection under liability arising from loan changes.

However, many of the mortgages owned by Countrywide (which has since been purchased by Bank of America), are owned by investors. The investors receive interests and principal payments from borrowers over the life of the loans. When the loans are modified, these payments are typically reduced. The investors are arguing that when Countrywide and Bank of America agreed to modify the loans, they breached their contract with the investors.

The ruling in the case said that the legislation did not prevent Countrywide’s investors from trying to enforce their rights under the mortgage servicing contracts. It would be up to the investors to prove that Countrywide’s pooling and servicing agreement requires it to repurchase the loans the bank modifies. The case would be in state court, outside of federal jurisdiction. Countrywide wanted the case to take place in federal court, due to the law being a federal law.

This case has some interesting implications. Right now, the Obama Administration has made it their priority to modify mortgages for borrowers, attempting to help the over 13% of homeowners who are currently delinquent on their mortgages. However, this case shows that even if the servicing companies and lenders agree, other parties, such as investors and hedge funds, may object. Certaintly there are bound to be losers from the housing bust and subprime mortgage crisis- the question is who will bear the brunt of the blow. As individuals argue in their self interest, it appears dangerously likely that the good of the collective whole will suffer.

Concerns with Appraisals Captivate Major Papers

Appraisers are under pressure to inflate property values.

Over the last two days, both the New York Times and the Wall Street Journal have published lengthy articles on the effects of the new Home Valuation Code of Conduct on appraisers. The Home Valuation Code of Conduct, which went into effect May 1, has made lenders responsible for ordering appraisals and negotiating with appraisers. As a result, appraisal companies are complaining that they are being paid less to do more work. In addition, appraisers are often required to travel farther to appraise homes, raising questions as to whether they are familiar enough with the area to provide a valid appraisal. A case highlighted in the Wall Street Journal article was that of a homeowner in Palm Beach Gardens, FL where the appraiser drove 44 miles to evaluate the home and came back with an appraisal that was around $70,000 less than the second appraisal. Furthermore, while the fees the appraisers are being paid have been decreasing, the cost to the consumer has risen by $100 in the past year, with most of the proceeds going to middle men.

Another concern raised by the industry is that being hired by lenders puts more pressure on the appraisers to return with a value that makes the deal possible. Appraisers need to keep the lenders happy to stay employed. If they demand fees that are higher than another appraiser or produce an unfavorable result, the lender may look elsewhere. As a result, some feel that the legislation risks putting ethical appraisers out of business.

Appraisal issues are common in reverse mortgages, and many of the issues raised in the article extend through both the conventional and reverse mortgage industries. As appraisals travel farther, there are more opportunities for mistakes. As appraisers worry about their fees and costs ride, the burden on consumers grows. Thus while the legislation has attempted to curb price inflation in appraisals and reduce the conflicts of interest, it appears to have arguably caused more problems than it has solved. Some in Washington are trying to get the legislation postponed until 2011.

HECM Volume Increases in July; Top 10 Lenders Shaken Up

HECM volume increased dramatically this month. 9,830 HECMs were endorsed in July, up from 8,633 last month. This is a good sign if 2009 HECM volume is to surpass the HECM volume in 2008.

The same 9 lenders continued to possess an increased market share despite one of them (World Alliance Financial Corp) going out of buisness last month. One wonders if the increased number of endorsed HECMs from World Alliance Financial Corp (also known as Senior Lending Network) are a result of them trying to close out their pipeline as fast as possible. World Alliance Financial Corp rose to the #3 spot this month from number 4 a month ago. It will be interesting to see if they remain in the #3 spot next month.

The top nine lenders are ordered below with rankings determined by the number of HECMs endorsed by the lenders YTD. Financial Freedom only endorsed 10 HECMs last month, while Countrywide endorsed 8. One Reverse Mortgage surpassed Countrywide this past month in HECMs closed YTD. Countrywide was acquired by Bank of America back in January, and it will be interesting to see if the HECM volume attributed to them continues to decline as well (so far it looks as if it has).

Finally, it is important to note that only nine lenders were highlighted because several lenders, led by 1st AAA Reverse Mortgage Inc. are clustered under Urban Financial. This group has closed between 900 and 960 leads so far this year, but is still well under Urban Financial’s totals.

Top Nine HECM Lenders by Volume – June

1. Wells Fargo

2. Bank of America

3. Financial Freedom

4. World Alliance Financial Corp.

5. Countrywide

6. One Reverse Mortgage

7. MetLife

8. Generation Mortgage

9. Urban Financial

Top Nine HECM Lenders by Volume – July

1. Wells Fargo

2. Bank of America

3. World Alliance Financial Corp.

4. Financial Freedom

5. One Reverse Mortgage

6. Countrywide

7. MetLife

8. Generation Mortgage

9. Urban Financial

The complete lender list can be found here.

7 Warning Signs of A Bad Reverse Mortgage Officer

As in any industry, there are good reverse mortgage officers and not so good reverse mortgage officers. The following are some ways to help separate the good from the bad.

1. Does Not Return Phone Calls- Communication is an important part of the relationship between a reverse mortgage officer and their client. The process is not always straight-forward, and the borrower may have questions along the way. Therefore if the reverse mortgage officer regularly does not return calls or does not return calls for long periods of time, it may be time to look elsewhere.

2. Unavailable – In the same vein as #1, if a reverse mortgage officer is continually unavailable, it is hard to complete a reverse mortgage transaction. If the borrower wants to meet with the reverse mortgage officer or has a question for them, the borrower should be able to reach them. If they continually can’t, it may be time for the borrower to find a reverse mortgage officer they can talk to.

3. Part-time Gig – While economic times have meant that people may be trying to add extra jobs to make up for a loss of income, the point that your loan officer is more likely to pay more attention to your case and do a better job on the file if getting dinner on the table is on the line is a valid one. Especially if your reverse mortgage officer has another job in a completely unrelated field, you may want to find one who specializes in their trade and can give your file the attention it needs… full-time.

4. Weary Traveler – Although economic times have led more people to switch jobs recently than they may have liked, be wary of a reverse mortgage officer who has switched companies extensively over the course of their career. There may be a reason why.

5. Inconsistent Answers/Unknowledgable – Reverse mortgages may not be the most basic product on the market, but a good reverse mortgage officer should be able to answer most questions you may have and know where to go to get the answers to the rest. Beware of reverse mortgage officers who change their answers or are inconsistent. Also beware if there are many questions that they cannot answer. And while most states require loan officers to be certified, if a borrower is suspicious they can always check to make sure their officer is licensed.

6. Pushy or Impatient- A reverse mortgage is a significant financial decision, so beware of reverse mortgage officers who try to push the decision on the borrower or hurry the borrower through the process. The loan officer should make sure that the borrower is comfortable with the process. If the borrower feels uncomfortable, they might want to seek out a reverse mortgage officer who will make them feel more so.

7. Behavior problems- See if any complaints are on file against your reverse mortgage officer or their company. If there are, borrowers might want to receive an explanation and possibly a different officer to work with.

Thanks to 6 Signs of a Crummy Real Estate Agent for inspiration.

ReverseMortgageGuides featured in April issue of "Reverse Mortgage"

The ReverseMortgageGuides.org Calculator was featured in this month’s issue of “Reverse Mortgage,” the official magazine of the National Reverse Mortgage Lenders Association. The article talks about the proliferation of online web applications for reverse mortgage lenders. The Reverse Mortgage Toolkit features a free calculator that can be embedded in a lenders’ site in only a few minutes. A more enhanced, paid version is in development.

Links to the calculator for both lenders and borrowers can be found below:

Reverse Mortgage Calculator (Borrowers): http://www.reversemortgageguides.org/reverse_mortgage_calculator.php

Reverse Mortgage Toolkit (Lenders): http://www.reversemortgageguides.org/toolkit/