The good & the bad from recent HECM changes
Sudden industry product changes are always coupled with challenges. Reverse mortgage professionals are seeing first-hand the impacts that HUD’s October surprise will have on borrowers seeking to refinance and payoff their mortgage and those seeking to purchase a home with a HECM.
For several weeks on this show, we’ve run down several short and long-term consequences of HUD’s reduced lending ratios, the returns of origination fees, and new insurance premium pricing. Today we are going to look at two scenarios- the borrower with a higher mortgage balance and a HECM for Purchase scenario.
Despite the financial assessment, several borrowers who would meet the guidelines are seeking to eliminate an existing mortgage who still have a nearly 50% existing loan-to-value ratio. In this example, we have a 72-year-old single borrower with a home valued at $375,000 and an outstanding mortgage balance of $175,000 being well under 50% of the home’s present value. Prior to October 2nd, this individual would only need to come in with $125 at closing after the lender credited or waived the origination fee. However, that same borrower would need to come in with over
1 Comment
We have long talked about under promising while over delivering. What the lesson of Mortgagee Letter 2017-12 teaches us is to promise even less when it comes to saying in general terms what a HECM can do for the borrower in the way of delivering peace of mind.
While the HECM may not be able to provide as much as it once did, that does not mean it is no longer the product that many seniors need in order to shore up their financial future. Unfortunately, since the size of the potential HECM senior market is now much smaller than it was back in September 30, 2009, we need to focus our targeting even more than we have in the past unless we are willing to lower even further our marketing efforts.
While we are all concerned about the senior we need to realize that it is imperative for us to find more effective ways of spending our marketing budgets with significantly better results in mind.