This week’s news roundup
[View the HECM Survey Results Here]
To say that HUD’s most recent changes to the Home Equity Conversion Mortgage were met with mixed reviews would be the understatement of the decade. Yet somewhere between hyperbole, user-optimism, and predictions of an industry apocalypse lies the truth. The tension between protecting against potential FHA insurance claims or loan defaults and meeting the need of future homeowners to leverage their homes in retirement has accelerated in recent years. In the wake of the program’s most recent overhaul AARP and industry professionals weighed in.
AARP’s Public Policy Institute’s Lori Trawinski said that higher costs and lower lending ratios may make the loan less attractive in her recent comments to Reverse Mortgage Daily. “So if someone is counting on a certain amount of reverse mortgage proceeds to be able to pay off a forward loan, it could be that with the new principal limit factors, they may not get enough proceeds out of the loan to do that.” Anecdotal reports from originators indicate that we may be still attracting a significant number of needs-based borrowers who need maximum proceeds to payoff an existing mortgage. However Trawinksi’s recent comments seem to contradict that trend. “For about three quarters of borrowers, the upfront premium went from 0.5% to 2%, so that’s a significant increase. It may dissuade some borrowers from going forward with the loan.”