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 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.
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.
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.
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.
NRMLA President Peter Bell testified in front of the House Subcommittee on Housing and Community Development today as part of a panel of witnesses on the future of the FHA. While Commissioner Stevens’ statements were written up in the New York Times, Bell’s comments provided a number of interesting anecdotes on the state of the reverse mortgage industry.
Bell talked about the risks to both borrowers and lenders. Borrowers risks include finding out they do not have enough money to remain in the home due to property taxes and insurance. These issues, which we have covered extensively in the past few weeks, only effect 2% of borrowers, and efforts are underway to help mitigate those risks. Lenders risks include being stuck funding a loan that is unable to get a certified by HUD. HUD is reducing this risk, by decreasing the Principle Limit Factors last week, and eliminating the need for a credit subsidy to the reverse mortgage program.
However, Bell’s main purpose in his testimony appeared to be to convince the House Subcommittee to extend the current reverse mortgage limits and to ultimately return to the prior Principle Limit Factors. HECMs have had a net gain of 7 billion dollars in the course of the program, and Bell argues that reverse mortgages have not played a role in the FHA’s recent capital reserve problems. Reverse mortgages are expected to operate on a break even or better basis in the future.
Furthermore, recent changes to the program will impede the ability of seniors to get a reverse mortgage. Over 20% of reverse mortgage borrowers in the last year would not have qualified if the Principle Limit Factors had been reduced to their current levels when they applied for the loan. New technology has reduced costs for lenders, and Bell maintains that the numbers used by the Office of Management and Budget (OMB) are not realistic, since the average lifetime of a reverse mortgage loan is 7 years regardless of the age of the borrower. Older borrowers average the same length of time with a reverse mortgage as younger borrowers. Bell was passionate that the reverse mortgage program has been self-sustaining and will continue to operate as such.
The President of NRMLA, Peter Bell, is currently testifying about reverse mortgages for the Subcommittee on Housing and Community Opportunity. His testimony (as well as the rest of the hearing) can be viewed at:
As the committee chairwoman said earlier, without the FHA, there would be no mortgage market right now. We will have more coverage of the testimony as it occurs later, for those of you who are unable to watch live.
The hearing appears to be more about the health of the FHA and the amount of reserves remaining, but so far contains interesting information for those interested in the business side of reverse mortgages, wholesaling, and the mortgage industry as a whole.
In a move that is designed to help the housing industry, the Wall Street Journal reported today that Fannie Mae and Freddie Mac are working on a program to help smaller banks get the short term credit needed to help them make home loans. This would come in the form of Fannie Mae and Freddie Mac making advance commitments to buy home loans that meet a certain criteria. The program builds on a pilot program already underway between Freddie Mac and NattyMac and Provident Lender Associates LP.
While it seems that much of this plan has yet to be announced, any assistance to small banks appears to be welcome. Another column in the Wall Street Journal pointed out that there are over 8,000 mortgage lenders nationwide (not counting reverse mortgage lenders). When one considers that the majority of mortgage loans tend to be completed by the three major banks- Wells Fargo, Bank of America, and JP Morgan Chase. These three lenders alone account for 52% of new home mortgages, up 15% from the 37% market share for the top 3 lenders in 2007. An increase in market share for the top lenders likely doesn’t bode well for the industry though. As a result, it will be interesting to see if the plan with Freddie Mac and Fannie Mae will help revitalize the mortgage industry by helping the smaller lenders.
Apartment vacancies reached 7.8% nationwide in the 3rd quarter, the highest point since 1986. The rate is expected to continue to rise in the winter months, which have continually seen lower demand for renters, as people are more likely to move during the warmer months. Nationally, effective rents have fallen 2.7% this past year, to around $972. However, this number is deceiving, as some markets have been hit harder than others. In fact, in the third quarter, 26 markets saw their vacancy rates improve, while 11 saw them remain stagnant. 42 markets saw their vacancies increase, the most dramatic being in Omaha, Nebraska, where they went up by 1.1% to 7.4%.
But the increased vacancy rates are not always correlating most strongly to decreases in rent. The biggest rent decreases are being found in San Jose, CA and New York City, with declines of 8.0% and 6.8% respectively. The decreasing rents and increasing vacancies have made it easier for renters to negotiate on prices and to shop around until they find the perfect place (and price). In addition, many former renters have bought homes for the first time taking advantage of the federal tax credit and the low housing prices.
This week’s reverse mortgage rates are below. These rates are effective for the week beginning October 6, 2009.
APR:
HECM LIBOR 225: 2.494
HECM LIBOR 250: 2.744
HECM LIBOR 275: 2.994
HECM LIBOR 300: 3.244
Expected Rates:
HECM LIBOR 225: 5.66
HECM LIBOR 250: 5.91
HECM LIBOR 275: 6.16
HECM LIBOR 300: 6.41
While the HECM LIBOR APR remained constant this week, the expected rate declined considerably, dropping two tenths of a point. Borrowers should see savings from such an interest rate decline, and hopefully the low rates will continue. This is the first full week that the new PLF limits will be in effect.
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.
