HUD Releases New RESPA FAQs

HUD released the long awaited new RESPA FAQs this morning. The document contains many common questions and answers about complying with RESPA.

RESPA, the Real Estate Settlement Procedures Act first passed in 1974, is the source of many of the basic federal reverse mortgage required disclosures, including the HUD-1 statement and the Good Faith Estimate (GFE). Most of the questions in the RESPA FAQs released this morning address the HUD-1 and GFE. There is also a specific section on reverse mortgages.

RESPA Rule FAQs

HUD Pushes Back Implementation of New Condominium Guidelines Again to December 7, 2009.

After already announcing a delay of the implementation of Mortgagee Letter 2009-19 to case numbers assigned on or after November 2, 2009, the Reverse Review reported today that HUD has delayed the implementation further. Guidance is expected from HUD in the next two weeks clarifying Mortgagee Letter 2009-19 and offering additional leniencies to address the difficult current market conditions. The changes will then go into effect on December 7, 2009.

For those who forgot, Mortgagee Letter 2009-19 changed the condominium approval process and condo unit eligibility for reverse mortgages. The Mortgagee Letter can be found at Mortgagee Letter 2009-19.

Option ARMs and Reverse Mortgages

Today’s Wall Street Journal featured a very interesting article on how Bank of America is using reverse mortgages to save senior borrowers. The cases include situations where Bank of America has taken a significant write down to allow the borrowers to stay in their homes. But not all borrowers may receive the same treatment as the borrowers highlighted in the article. As the story notes, most borrowers who received the modified reverse mortgage had taken out option ARMs.

Option ARMs (Option Adjustable Rate Mortgages) have become “the new subprime mortgages,” leading many borrowers into foreclosure. 32% of option ARM borrowers were delinquent or in foreclosure last month, compared with 48% of subprime mortgage borrowers. Unlike subprime mortgages, option ARM mortgages generally went to borrowers with good credit, including seniors with significant equity in their homes looking to refinance. The option ARMs have also proved difficult to modify, since the low interest rates on the loan often cannot be lowered any further. Lawsuits have been filed by borrowers claiming they were misinformed of the loan’s complicated structure, which in many cases can lead payments to balloon after a few years.

As a result of the lawsuits, as well as the settlement of a suit against Countrywide, which was since acquired by Bank of America, Bank of America has agreed to modify option ARMs and subprime mortgages where possible. While it appears that Bank of America has so far only issued about 20 reverse mortgages to borrowers with option ARMs, it looks like a good start to fixing a significant problem. Borrowers with option ARMs from Bank of America may want to talk to their servicer or the bank about a modification, perhaps with a reverse mortgage.

Breaking News: Bank of America Resumes Offering Fixed-Rate Reverse Mortgages in Illinois

Bank of America announced this morning that it is resuming offering fixed-rate reverse mortgage loans in Illinois. The decision comes after Bank of America has reviewed its policies relative to Illinois’ High Risk Home Loan Act (HRHLA) and determined that the loans can be offered as long as they meet the following criteria:

- Closing costs, defined as all costs paid by the borrower directly or indirectly, do not exceed 5% of the total loan amount.

- Bank of America’s high cost worksheet must be completed.

- Bank of America’s high cost worksheet must be submitted to fulfillment and indicate that the loan has “passed” the high cost test.

Says the letter, “Bank of America stands behind its commitment to provide clarity and transparency to home lending. To that end, we have chosen not to engage in the production of high cost loans.” Bank of America also announced that loans declined when the product was suspended September 16th can now be re-submitted for approval. The decision should come as welcome news to reverse mortgage lenders in Illinois.

This Week's Reverse Mortgage Rates: October 20, 2009

This week’s reverse mortgage rates are below. These rates are effective for the week beginning October 20, 2009.

APR:

HECM LIBOR 225: 2.495

HECM LIBOR 250: 2.745

HECM LIBOR 275: 2.995

HECM LIBOR 300: 3.245

Expected Rates:

HECM LIBOR 225: 5.89

HECM LIBOR 250: 6.05

HECM LIBOR 275: 6.30

HECM LIBOR 300: 6.55

The HECM LIBOR APR remained almost unchanged for the fourth consecutive week. However, expected rates rose significantly. The expected rates are up .15 this week. One hopes this is not the beginning of an upward trend. After a short week last week, these rates will be good for a full seven days.

The New York Times Publishes a Retirement Section

This weekend’s New York Times features a special section on retirement. The section, which can be found online as well as in print, features articles on Medicare, job hunting, 401Ks, and even reverse mortgages. However, it is frustrating that the piece on reverse mortgages is very vague and generic. The piece talks about reverse mortgages as a last resort, primarily for those who do not want to leave the home to their heirs. But this is the opposite of what some other media pieces have talked about in recent months, where a reverse mortgage was used as an estate planning tool in order to help borrowers pass on larger amounts to their heirs by avoiding the estate tax.

Nonetheless, with the exception of the vague reverse mortgage information, many other articles within the section may be useful to our readers.

Reverse Mortgage Guides Adds Videos

Reverse Mortgage Guides added two new videos for consumers to the site today. The videos can also be found on YouTube. Reverse Mortgage Guides is excited to be able to offer this valuable feature to our visitors.

The videos can currently be found on the “What is a Reverse Mortgage” page and the “Pros and Cons” page. More videos will be added soon.

In addition, if you would like to contribute a video to the site, please comment below or contact reva.minkoff (at) reversemortgageguides.org.

This Week's Reverse Mortgage Rates: October 14, 2009

This week’s reverse mortgage rates are below. These rates are effective for the week beginning October 14, 2009.

NOTE: The rates initially published on October 13th were incorrect by 1 thousandth of a point. Please consult the rates below moving forward.

APR:

HECM LIBOR 225: 2.495

HECM LIBOR 250: 2.745

HECM LIBOR 275: 2.995

HECM LIBOR 300: 3.245

Expected Rates:

HECM LIBOR 225: 5.65

HECM LIBOR 250: 5.90

HECM LIBOR 275: 6.15

HECM LIBOR 300: 6.40

The HECM LIBOR APR remained almost unchanged for the third consecutive week. The expected rate only decreased by one hundredth of a point. Due to the Columbus Day Holiday, these rates will only be in effect from October 14th to October 19th.

California Passes New Reverse Mortgage Legislation

This weekend Gov. Arnold Schwarzenegger signed AB 329 into law in California. The bill finally establishes the Reverse Mortgage Elder Protection Act of 2009. The bill prohibits cross-selling, requires the lender to provide the borrower with no fewer than 10 nonprofit HUD-approved counseling agencies, and requires the lender to provide the borrower with a checklist of issues to discuss with the reverse mortgage counselor. The loan application will be unable to be approved without the signed checklist. However, given that the first two requirements are included in national legislation, the main feature of the bill will be the addition of the checklist to the reverse mortgage counseling process.

The provisions of the bill will be administered by both the California Department of Real Estate and the California Department of Corporations.

The bill can be found at: AB 329

Reverse Mortgage Counseling Shifts to New HECM Roster

Today marks the one week anniversary of the shift to the new HECM roster. The new roster means that the new requirements for reverse mortgage counselors have gone into effect. Only counselors that have met these requirements will be permitted to provide HECM counseling. As a result, the number of agencies providing HECM counseling have, for the time being at least, decreased dramatically. Some states, such as Delaware and Hawaii, do not have any local counseling agencies that have met the new requirements and are on the HECM roster. However, since many counseling agencies provide counseling on a national level by phone, borrowers in these states are unlikely to feel any ill effects.

The list of new counselors can be found at: https://entp.hud.gov/idapp/html/hecm_agency_look.cfm