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Financial Columnist Has a Change of Heart on HECMs
Our industry has chaffed in years past at what many perceived as media bias against the reverse mortgage. Slanted stories, borrower tales of woe and outright misinformation are just a few examples. Even fair-minded financial writers often viewed the loan with skepticism cautioning readers to proceed with caution. Ironically recent changes to the HECM program have helped change the mind of some previous critics of the loan.
Personal finance writer Jane Bryant Quinn is no stranger to national magazines and newspaper publications. For three decades she wrote a biweekly column in Newsweek , a twice-weekly column syndicated by the Washington Post and made numerous television appearances. This well known and respected financial writer recently shifted her opinion about reverse mortgages.
Download a transcript of this episode here.
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6 Comments
It surely cant hurt. Fact is, we will need the buy in from many – mostly the financial planning community. However, it may take some time before this can happen. These are all solid changes that we in the field must make known to those who want to listen. In 2016 I plan to talk about the changes daily.
Shannon,
It is good you called this to everyone’s attention. The influence of Ms.Quinn traditionally has been strong among mass affluent older Americans. This is but another person of significant influence who is beginning to see the value of the HECM line of credit coupled with the so called safeguards provided in the some of the 2014 and 2015 Mortgagee Letters.
It is now almost 9 months after the last of the safeguards have been implemented and the low 5% or less loss in business that many lenders were claiming we would see with the last piece, financial assessment, has now been brought into question. Those who spoke of signs of recovery even three months ago are now silent and are excusing their predictions by saying how the repository is showing one trend and endorsements another. For now the repository data has lost much of its hoped for credibility in trend modeling when it comes to endorsement predictions.
Yet Case Number Assignments are beginning to show a glimmer of recovery in the most recent three month period, FHA has reported, i.e. August through September, 2015.
Despite gloom and doom of lost endorsements exceeding 20% predicted during winter and early spring due to financial assessment, the endorsement loss for the fiscal year 2016 compared to fiscal year 2015 will be closer to 12% which is still more than double the percentage many lenders were trying to convince us the potential loss would be.
For now it is great to be told by so many prominent people in the financial community that HECMs are a great retirement financial tool for seniors. But what is needed is to see some of that retraction and glowing reports on HECMs turn into referrals and endorsements so that this will be more than another fiscal year of endorsements in the low 50,000’s.
It is not an easy thing for a prominent person to admit an error publicly. Ms. Quinn has done a great service to seniors and our industry at her own expense.
Ms. Quinn has been there for the rich and upper middle class for decades. Few of the prominent have done a darn thing to help the working man. That includes advise about HECMS. Many feel that the new terms are there just to circumvent the law and that they certainly don’t follow either the meaning nor the intent of the law. We help far fewer of the people we once did. While we have attracted some people that are better off financially to this loan , the poorer folk that worked hard to help themselves and paid the bulk of the property Taxes-can go hang ! I am told that HECM’S have raised over 40 billion dollars for FHA with only 3 billion spent for HECM foreclosures. That leaves about 37 billion that should be HECM money that has gone to the FHA general fund to lower rates for those younger. I read that we now have a lower home ownership rate that we did in 1965. And if we don’t start treating the old folks better the home ownership ranks will grow smaller still. But creating a huge rental market may be what rich hedge funds want. At least landlords are more likely to pay their property taxes and Insurance aren’t they?
Boyd,
When it comes to your comment on HUD handling MIP cash inflow, it is callous and reckless because it is based on “I am told that….” Many of us have also been told Santa delivers Christmas presents and fairies bring us money for our teeth when they fall out as children; your comment on HECM MIP cash inflow and outflow belongs in that category when you say “HECM’S have raised over 40 billion dollars for FHA with only 3 billion spent for HECM foreclosures. That leaves about 37 billion that should be HECM money that has gone to the FHA general fund to lower rates for those younger.”
How valid are your numbers? Were they audited by a recognized independent party? Where do you get the idea money goes from the HECM portion of the MMI Fund to the General Fund? Have you ever read a single MMI Fund audit report or a single MMI Fund actuarial report on HECMs only?
Your rumor is disgusting and shows very little knowledge of the HECM program and how it actually works. I have some formal training in accounting in college but I am still learning the actual procedures HUD employs in managing the HECM program but that is in part because I have never been part of an independent audit of HUD or been part of its internal accounting or audit teams.
Yet I have read most of the actuarial reports on the HECM portion of the MMI Fund, various MMI Fund financial statements, independent auditors’ reports, and other reports on the HECM portion of the MMI Fund. I have also spoken with several members of the HUD managerial staff who know the accounting and cash flow processes. What you state is irresponsible and fiction.
Speaking frankly, it is so ridiculous to even imply that the cash flow for the HECM program goes from the MMI Fund to the General Fund, that it should receive some kind of prize for how far off rumors can lead those who claim to have some (and perhaps do) knowledge on a subject.
Shannon,
Great presentation. As far as how the HECM is perceived in our industry today since the FA ruling came into effect should be a 100% improvement.
However, it is like everything else, the word needs to get out. We as an industry need to educate the media in any way we can, either by going on talk shows, writing letters to editors ETC.
Reverse mortgage loan originators need to hold educational workshops in various communities to inform seniors and media sources themselves as to the improvements to our products.
The HECM of today not only strengthens our industry from the issuance of securities to lenders risk but mainly for our seniors.
When I say our seniors, I am referring to the so many seniors in the past that have gotten a HECM who, unfortunately should not have been qualified for one in the first place.
Most foreclosures has been because seniors have not had the money to pay for their property charges that hit them in a lump sum annually. I feel we are now protecting seniors from themselves in many ways.
I feel much more confident that the changes have strengthened our industry and will give us a greater and more secure footing for the future of our product!
John A. Smaldone
John,
The principal cause of foreclosure is not a default caused by failure of pay either property taxes or insurance but rather the death of the last surviving borrower who uses the home as the principal residence and a lack of cooperation from the estate or trust due to the value of the home being less than the balance due.
Default from a tax or insurance premium payment failure is high on the list of reasons for HECM foreclosures. Let us not perpetuate a falsehood to express a truth.