This week’s reverse mortgage rates are below. These rates are effective for the week beginning June 30, 2009.
APR:
HECM 300: 3.48
HECM 325: 3.73
HECM 350: 3.98
HECM LIBOR 250: 2.810
HECM LIBOR 275: 3.060
HECM LIBOR 300: 3.310
Expected Rates:
HECM 300: 6.63
HECM 325: 6.88
HECM 350: 7.13
HECM LIBOR 250: 6.39
HECM LIBOR 275: 6.64
HECM LIBOR 300: 6.89
Both the HECM Libor and the HECM CMT saw significant drops in Expected Rates this week, as well as declines in their APRs.
The New York Times featured an article on the HECM for Purchase Program.
Friday featured a welcome piece of publicity for the reverse mortgage industry: Bob Tedeschi’s mortgage column in The New York Times was about the HECM for Purchase Program. Now that the new underwriting procedures for HECM for Purchase loans have been laid out in a recent HUD mortgagee letter, HECM for purchase loans are beginning to close. However, as the article points out, New York has not been well represented in that mix due to the fact that HECM for Purchases cannot currently be used to purchase a co-op.
The column mentions the high fees associated with the loan. Taxes are higher in NY than in most other states, so that does not help. The column also points out that the HECM for Purchase program is probably not a good idea should one intend to move again within 2-3 years. And, while Tedeschi cited the importance of reverse mortgage counseling, he also pointed out that the quality of counseling can vary, steering prospective borrowers towards those who have past HUD’s certification test.
All in all, though the column could probably be a little clearer, it hopefully will serve as a good step in educating prospective buyers about the HECM for Purchase program. And, afterall, there is a saying, “There is no such thing as bad publicity.”
Some reverse mortgage questions get asked over and over again. In honor of that, answers to some common reverse mortgage questions are below. More questions will be posted at a later date:
Q: Can my heirs still inherit my home?
Yes. In a reverse mortgage, the estate is still passed to the heirs. Often, the heirs choose to sell the home with the proceeds going towards repaying the reverse mortgage. The lien cannot be for more than the home is sold for, so if the home is sold for less than the value of the lien, the lender must make an insurance claim for losses to the FHA. Once the home is sold, the estate owes nothing.
If, however, the heirs wish to keep the home, they can pay back the reverse mortgage through cash or other assets. They can also refinance the reverse mortgage into a conventional forward mortgage.
Q: Can I outlive a reverse mortgage?
No. A reverse mortgage is not due until the death of the borrower or until the borrower sells the home or moves to permanent care. There is no limitation, so if you live in your home for another 50 years, the reverse mortgage will still not become due until your death.
Q: Will my Social Security and Medicare be affected?
While government entitlement programs such as Social Security and Medicare are not affected by a reverse mortgage, need-based programs such as Medicaid may be. The pace of the fund withdrawal must be limited to remain eligible. Talk with your loan officer to make sure your payments for the reverse mortgage do not jeopardize your eligibility.
Q: What are the downsides?
The costs of a reverse mortgage can be high and are higher than the costs of a conventional mortgage. If the proceeds are not withdrawn correctly, a reverse mortgage can hurt one’s ability to qualify for Medicaid and other need based programs. If a person’s home has a high value, they may not be able to get enough money out of their home to make a reverse mortgage make sense. If one spouse is under the age of 62 and taken off the title for the purpose of a reverse mortgage, the reverse mortgage will become due upon the death of the older homeowner, which might prove to be a problem for the spouse. Lastly, for homeowners who want to pass their home on to their children or grandchildren, a reverse mortgage may not be the best idea.
Q: I’m selling my home to the bank, right?
No. The deed and title to the home stay in the borrower’s name. Like with any mortgage, the lender adds a lien to the title for the amount borrowed so they can guarantee it gets paid back.
In a report published on Wednesday, the National Association of Realtors (NAR) proposed that Obama’s tax credit for first time buyers should be expanded across the market to all buyers. Concerns were also raised about appraisals. Lawrence Yun, the NAR’s cheif economist, cited the appraisal problem as “serious,” and characterized by buyers using appraisers who are not from their neighborhood or who are comparing their property to distresed or damaged homes. These appraisal problems are allegedly pulling down home values, and hurting the industry.
Complaints about appraisals are nothing new. However, the importance of a good appraisal is especially crucial in this economy, where there are so many distressed properties on the market that a home could be compared to. It is nonetheless true that, as we reported, have a foreclosed home within 500 ft. of a property decreases its value significantly. As the number of foreclosures increase, more properties will be affected. Nonetheless, it is also true that a home that is not in foreclosure should probably not be valued the same as a home in foreclosure. One is a distressed property, the other is not.
In terms of expanding Obama’s tax credits, the NAR proposes an interesting idea. It is true that an expanded tax credit would probably drive more buyers into the market. However, the influx of buyers would not necessarily cause the market to rebound. We have already seen an increase in home buyers, but property values still remain low and there still remains a lot of properties on the market. Introducing more potential buyers would likely not change these facts when there are still so many foreclosures dragging down property values in many areas.
NRMLA released two new ethics advisories today: 2009-01 “Ethical Offers of Other Financial and Insurance Products and Services”, which covers recommendations for following the new rules and restrictions laid out concerning cross-selling, including those in the McCaskell ammendment and the recent HUD mortgagee letter. The other ethics advisory, 2009-02 “Lead Generation State Licensing Requirements and Ethical Advertising”, covers lead generation activities, and reiterates the NRMLA ethics committee’s intention to report or publicly name violators. NRMLA members and nonmembers alike should read these advisories, as the ethics committee also announced its authority to remand non-member violators and report them to the approrpriate authorities.
Existing home sales rose in May according to a report released to day by the National Association of Realtors. The level of 4.77 million homes is a 2.4% increase from an adjusted 4.66 million homes in April. However, it remains 3.6% below last year’s levels. The increase in homes sold is attributed this time to many returning buyers, who are gravitating towards existing home sales rather than distressed properties. Distressed sales fell to 33% of the sales in May, versus 45% of the sales in April. Yet the median home price, of $173,000 is still down 16.8% from a year earlier.
In other words, first time home buyers tend to gravitate towards homes in foreclosure, due to the lower prices. Yet these sales drag down the home values in the neighborhood, as we have discussed before. Return buyers, on the other hand, are less likely to buy a home in foreclosure. Their increasing market share appears to be good for the housing market as a whole, yet the steady decline of housing prices continues to have the real estate industry concerned.
This week’s reverse mortgage rates are below. These rates are effective for the week beginning June 23, 2009.
APR:
HECM 300: 3.51
HECM 325: 3.76
HECM 350: 4.01
HECM LIBOR 250: 2.817
HECM LIBOR 275: 3.067
HECM LIBOR 300: 3.317
Expected Rates:
HECM 300: 6.75
HECM 325: 7.00
HECM 350: 7.25
HECM LIBOR 250: 6.47
HECM LIBOR 275: 6.72
HECM LIBOR 300: 6.97
Both the HECM Libor and the HECM CMT saw significant drops in Expected Rates this week and small declines in their APRs. Hopefully rates will continue to trend downwards.
HUD announced this week that they would be offering $58 million in grants for housing counseling in 2009. This is an increase of $11 million from a year ago. The money is especially significant in a time when many agencies and nonprofits are finding their budgets cut, and as pressure rises, both in Congress and in the legislatures, to increase protections for consumers in mortgages and reverse mortgages. As the number of foreclosures and delinquencies are at record highs, there is even more potential for housing counseling to help homeowners avoid getting into difficult predicaments and find the right solutions to get out of them while keeping their homes. Government programs are sometimes notoriously difficult to manuver, and counseling can often help consumers make their way through the forms and red tape–or avoid getting in those situations in the first place.
It is good to see the government recognize the importance of counseling and take steps to help fund this much needed avenue.
A report released by the National Association of Home Builders (NAHB) indicates that the market sentiment index among US home builders has fallen by 1 (from 15 to 16) in their June survey. Many factors appear to support this fall:
– foreclosures have increased
– the home for sale:home sold period is now greater than 10 months, a large number for the housing industry
– mortgage rates have increased dramatically in recent weeks
– new home sales have increased
– housing prices are down 15% in April year over year
and, perhaps most importantly for those participating in the survey, home construction was down 13% in April vs. March. Construction year over year was at less than half of the April 2008 levels.
It is therefore unsurrpising that home builders are not optimistic about the market right now, especially since new properties to continue to compete against old properties, and the depreciation occuring and difficulty of selling homes does not make building new properties a sure bet.
The front page of today’s Wall Street Journal featured a touching article about the difficulty of getting a mortgage modification. We have stated the facts in this piece many times, including the crucial fact that 9% of 45 million American homeowners were delinquent on mortgage payments in the first quarter of 2009. Yet, only about 500,000 loans have been modified thus far, leaving at least 3.5 million people without a much needed modification. It has also been stated often that a modification is hard to come by. While the article goes into more specifics, the stories of piles of paperwork and miles of red tape are already widespread.
Given what is clearly a problem, I wonder if there is not some solution that would do a better job of solving these issues. If a customer has applied for a mortgage modification, is getting stuck in red tape, and there is already a glut of houses on the market, why not order a temporary halt to the foreclosure until the situation can be resolved? It is hard to believe that it is a best practice to penalize a customer for the bureacracy surrounding the new programs that Obama has created (as well as existing ones that are seeing a surge of interest).
As the article pointed out, there are many parties with stakes in a foreclosure. The lenders and investors care about the outcome of an overdue loan as well. However, harried bankers and servicers need to be given the time to adequately resolve these claims. Unfortunately, as more and more homeowners head into foreclosure, time appears to be sorely lacking.