HECM Volume in September Increases Over August

September’s HECM volume report as published by HUD (U.S. Department of Housing and Development) showed that the number of HECMs endorsed increased by about 500 loans from August to September. The number of HECMs endorsed in September was 9,473, while 8,933 HECMs were endorsed in August. However, this number does not reflect the dramatic increase in the number of case numbers assigned the last week in September during the final days of the former PLF limits. As such, the number of HECMs endorsed should rise rapidly in October and November, as they are processed and closed.

In the meantime, the HECM lenders in the top 10 remained unchanged from August. These top 10 lenders are measured by the total number of HECMs endorsed so far this year, explaining why some lenders that have left the reverse mortgage business are still in the top 10. The list is as follows:

1. Wells Fargo

2. Bank of America

3. World Alliance Financial Corp

4. Financial Freedom

5. One Reverse Mortgage

6. MetLife Bank

7. Countrywide Financial

8. Generation Mortgage

9. Urban Financial Group

10. 1st AAA Reverse Mortgage

It will be very interesting to see if this list changes in the next two months as the number of HECMs endorsed increases dramatically. The complete list for September can be found on the HUD website. The changes will be reflected on the Reverse Mortgage Guides website in the Lender Directory within the next week.

Tax and Insurance Obligations and How to Handle Them

Tax and Insurance questions were one of the most interesting issues raised at the MBA Reverse Mortgage Conference in San Diego earlier this month. As the reverse mortgage product evolved, they are also two questions that are likely to be closely attended to.

A report by the Government Accountability Office (GAO) cited the phrase “Never lose your home” as a problem in reverse mortgage advertising because if a borrower does not pay the tax and insurance obligations on the home, the borrower can be foreclosed upon. Right now 2% of all reverse mortgages go into default due to so-called T&I issues. However when these issues were discussed at the MBA conference, it appeared that there were things that borrowers could easily do to avoid these potential problems. Many just did not know they could do so.

One is to set up a tax and insurance set-aside account. Doing so would take some of the reverse mortgage proceeds and set them aside to pay taxes and insurance on the home. This would assure that the borrower always has the money to pay for taxes and insurance and that they are paid automatically. It is one easy way for a borrower to handle the tax and insurance obligation. However, many borrowers currently do not take advantage of this option.

Another is that there are many tax exemptions for seniors. However, many seniors do not realize they are eligible. Seniors should inquire with their states and municipalities about property tax exemptions that they may be eligible for. While there is often a lot of red-tape surrounding these exemptions, they can save seniors significant amounts of money.

Tax and insurance obligations do not need to be reasons for a reverse mortgage to default. If borrowers are responsible and plan in advance, they can alleviate the obligations before they ever become a problem.

Financial Freedom Pulls Fixed-Rate Product From Illinois

Financial Freedom announced that effective immediately, it too is discontinuing fixed-rate reverse mortgage loans in Illinois. This comes after Bank of America stopped offering its fixed-rate product in Illinois. All these changes are due to concerns about the Illinois High Risk Home Loan Act (HRHLA) which only applies in the state of Illinois. The act is designed to protect borrowers against high-cost loans, and applies to all kinds of loans and mortgages. Under the threshold set by HRHLA, many fixed-rate products are high cost, since the total closing costs often exceed 5% of the principal limit of the loan.

It is important to note that the fixed-rate product changes in Illinois do not affect any other states. Meanwhile, borrowers in Illinois can still complete reverse mortgages using the LIBOR, while local lenders wait for changes to the HRHLA to be enacted. That said, MetLife and Reverseit are still offering their fixed-rate products… at least for the time being.

Reverse Mortgage Applications Surge

With the principal limit factor decreasing by 10% tomorrow, the number of reverse mortgage case numbers assigned has surged in the last few days. A letter from Peter Bell, President of NRMLA, announced that 60,784 case numbers had been requested in “the last few days.” That is more than half the number of HECMs endorsed in all of FY 2009.

The good news is that, so far, the system seems to be working. Of the 60,784 case numbers, 58,631 were issued in less than two seconds, and an additional 1,800 were issued in less than 10 seconds. These turnaround times are a good omen for those concerned about the FHA Connection system’s ability to handle the increase in demand. However, with about 12 hours until the deadline, it’s too early to alleviate all concern.

This Week’s Reverse Mortgage Rates: September 29, 2009

This week’s reverse mortgage rates are below. The rates are effective for the week beginning September 29, 2009.

APR:

HECM LIBOR 225: 2.496

HECM LIBOR 250: 2.746

HECM LIBOR 275: 2.996

HECM LIBOR 300: 3.246

Expected Rates:

HECM LIBOR 225: 5.86

HECM LIBOR 250: 6.11

HECM LIBOR 275: 6.36

HECM LIBOR 300: 6.61

While the HECM LIBOR APR remained constant this week, the expected rate declined slightly. As this is the last week that borrowers will be able to get in under the old Principal Limit Factors (PLF) before the new PLFs go into effect on Thursday, the decline in expected rate is welcome.

Genworth Financial Announces Fixed Rate Product

Genworth Financial Home Equity Access has announced it is coming out with a fixed rate reverse mortgage product, with a 5.625% interest rate. Genworth is likely to be the last large wholesaler to announce a fixed rate reverse mortgage product, but with a lot of lenders reporting slow turn times with the fixed rate products at wholesalers, this will hopefully help alleviate some of the congestion within the market. The more wholesalers that offer reverse mortgage products, the faster the industry turn times will be.

Housing Market Bounces

As the news today that housing resales dropped in August sent stocks spiraling downwards, those within the real estate industry were faced with a really interesting reality. The housing market rebound may not be as linear as once hoped.

Existing home sales fell 2.7% in August after a record increase of 7.2% electrified the industry in July. However, there are many factors that likely played into the change. The federal tax credit of $8,000 for new home buyers is due to expire soon, likely contributing to the glut of deals in July. Jobless rates continue to be high, as do foreclosures. With many foreclosures yet to hit the market (likely knocking home prices down), it seems reasonable to think that the market may not climb steadily, but rather peak and valley as it restarts.

This may just mean that government programs and incentives (such as the tax credit) are important to getting consumers back in the market, and that sellers may just need to watch timing to match the ups and downs of the market. Even when home sales increase, the inventory of houses on the market is still high and unlikely to dissipate rapidly. But sellers can likely work within the curves of the market to best optimize when to sell their home (and at what price).

Finally, the coming winter means that it’s unsurprising that home sales will dwindle. Home sales generally increase during the spring and summer, with the warmer temperatures. Sales will probably decrease as fall changes to winter.

Breaking News: HUD Reduces Principal Limit on Reverse Mortgages By 10%

HUD just announced today that effective October 1, 2009, the principal limit factor (PLF) on reverse mortgages will be reduced by 10%. The new PLF table can be found at: http://www.hud.gov/offices/hsg/sfh/hecm/hecmhomelenders.cfm. This PLF table will go into effect for all loans taken on or after October 1, 2009.

These changes to the principal limit are not a large surprise, given the appropriations bills now going through Congress. The reverse mortgage program was not designed to be supported by a credit subsidy, and since the appropriations bill is also unlikely to grant a subsidy, program changes are the only way to keep the reverse mortgage program operating in the new fiscal year (which begins October 1, 2009). Nonetheless, these changes are not likely to be embraced by the reverse mortgage community, as they will prevent some seniors from receiving the amount of money from their homes necessary to be eligible for the program. A reverse mortgage was designed to help as many seniors as possible. This is likely to reduce their ability to do so.

The mortgagee letter can be found below:

Mortgagee Letter 09-34

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.