The Must Stay

Shannon Hicks March 4, 2013 4

 

Is Better Education the Solution?

Reverse Mortgages Must Stay to Meet Demand. With the words of one senator asking why not stop the reverse mortgage program ringing in our collective ears, it is comforting to hear that housing experts see things differently. The Bipartisan Policy Center Housing Commission says reverse mortgages and other home equity alternatives must remain an option.

The report “Housing America’s Future: New Directions for National Policy” said “Steps should be takent to provide effective guidance to ensure consumers understand the mechanics of reverse mortgages, including the risks and benefits…” They have a point. More seniors should be aware of the product’s existence and if it is a good fit for them. The problem is what the report is asking for already exists in mandatory HECM counseling. It’s the same call for consumers to better understand the product. But what about the government taking a more proactive role…

4 Comments »

  1. James E. Veale, CPA, MBT March 4, 2013 at 9:43 am - Reply

    Shannon,

    There is one product which would be a huge help right now and that is a hybrid Standard and Saver. Of course, I have been saying this in one form (before 10/4/2011) or another since 2007 so it is not exactly new.

    Seniors would have the fixed rate security they desire while at the same time have a line of credit (and of course tenure and term payouts available as well) to draw from in the future. My words echo the opinion of HUD staff that hybrids would be “ideal.”

    What a great product to promote. Caps on payouts within the first year would be far less of a problem.

    Let us hope it catches on within the secondary market. Perhaps that is where new education efforts should be focused.

    The foregoing is my opinion and not necessarily that of Security One or its affiliates.

  2. Joe Mustone, BSB March 4, 2013 at 11:54 am - Reply

    Hello Shannon,

    I agree 100% with the the above response from James Veale. I too have been speaking out about the hybrid. It solidifies and benefits the product from every angle, from the client, to the lender, to the secondary market, while keeping the program healthy from the insurance aspect.

    Let’s hope that this hypothetical prospect comes to fruition.

  3. Kenneth Craynon March 5, 2013 at 9:06 am - Reply

    I find it difficult to understand how a US Senior or Representative can understand or recommend any changes to the HECM. With counseling in place already, they want more education for the client?

    It’s not a wonder that we have the sitauation in WASHINGTON,DC. bUT, that aside, I agree the Hecm should be used to better the living standards for Seniors.
    I would like to see comparison of FHA purchases and HECM defaults.

    • The_Cynic March 5, 2013 at 12:36 pm - Reply

      Ken,

      Commissioner Galante in her testimony last month in the House described the seriously in default in the forward portion of FHA business at around 9.5%.

      As to counseling being in place, when has it not been in place when it comes to HECMs? Yeah, it was odd to hear some discussing education. They seemed intentionally off target so as to take the heat off of where the real problems are.

      In case you are not aware of it, the Congressional hearings have little to do with defaults and a whole lot to do with the negative net position of the MMI Fund. They are investigating why the actuarial report shows the MMI Fund off by over $38 billion from their mandated $22.62 billion capital reserve requirement.

      It has been estimated by some that the HECM part of the MMI Fund is off its target by well over $4 billion and that does not include funds FHA has already transferred into it in the last three years just to pump it up.

      When capital reserves are less than the 2% requirement, it is up to Congress to find out why and make recommendations on how things should change. This time, Congress is just actually doing their job of overseeing FHA and HUD in particular.

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