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Reverse Mortgage Industry – Are we too big to disappear (fail)?


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The Future Of The Reverse Mortgage Industry

Will our industry disappear due to economic pressure and regulation?

Our commentary examines while we are small segment of mortgage lending are we irreplaceable nonetheless? It’s a look at an industry coming of age.

Watch this week’s video and leave your comments below.

The Future Of The Reverse Mortgage Industry


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  1. After reading the HECM actuarial report, I do not draw the same conclusion about the security of the HECM portion of the MMI fund.

    During the last fiscal year, HUD was forced to transfer an additional amount [in excess of one-half billion dollars] from the capital reserve fund to the HECM portion of the MMI fund, just to get the value of the HECM portion of the fund back to zero. The HECM program has received over $2.2 billion from the capital reserve fund without ever contributing a single dollar into it. The capital reserve fund comes from other programs in the MMI fund, not HECMs at least not right now.

    Then comes the value of the HECMs insured through the MMI fund as of September 30, 2011, which only includes those endorsed after September 30, 2008 and still outstanding. That value is over $1.3 billion which looks very encouraging on its surface until you dig just a little deeper. It turns out the value has risen hundreds of millions of dollars due to changes in how the value is reported. While this is more than just a slight of the hand, on a basis consistent with the methods used in the prior year, the value is much closer to one-half billion than $1.3 billion.

    Is the program in trouble? Well the program has NEVER been in trouble over taxes and insurance. It is the lenders which could have trouble on that front. But yes, there is reason to have some concern about the longevity of the program if the housing market staying the sewer much longer.
    The actuarial report does a great job of showing where the program will be if certain housing value trends occur. It could get very ugly. We are by NO means out of the woods, just yet.

    If the housing market does not turn around in the next few years, HUD will be asking Congress for funding out of necessity, not just as a budgetary concern for the book of business for the following fiscal year. Right now things can be adjusted here and there but long-term, we need the housing market to turn around. The sooner, the better but the only trouble is the only one who might be able to do something about it is oversees trying to build up his foreign policy resume (and perhaps legacy).

  2. The industry is complex. There are various areas which dramatically impact us.

    First is sales. I never have a bright outlook for an industry which is seeing its sales shrink; yet that is our recent past and worse, what appears to be our immediate future. Despite general endorsement shrinkage, as to the more affluent, there are growing signs of acceptance by their previously pessimistic financial advisers. But it will be years before Savers will match the profit Standards provide the industry even now. [As to an immediate drive for increased overall endorsements, lenders and TPOs are distracted by their immediate opportunities for growth due to the loss of Wells Fargo, Bank of Ameria, Financial Freedom, and others. Lenders are also distracted by taxes and insurance defaults as well as financial assessment and what HUD will be providing in guidance on that front. Yet as to the industry as a whole, endorsements are on a downward “slide” with no end in sight mainly due to the continued downward slide in home values.]

    The secondary market will always be in flux. That is its nature. But despite worries, investors RIGHT NOW seem very bullish on HECMs.

    Like The_Cynic, my greatest concern (yes, beyond the downward trend in sales) is with the MMI Fund. I am not as optimistic as some HUD leaders on how much Savers will contribute to the MMI Fund even though most if not all Saver related MIP should be available for use by HUD to offset losses from Standards. There is much more to say but The_Cynic did a good job except to ask: Will PLFs need to go down next fiscal year?

    While we can do little to change most things, there is a real need for the industry to do all it can to profitably increase overall HECM endorsements. The large lenders must not sit on the increased market share they are gaining this year. Without a reversal in the endorsement trend, we can only be a thriving industry for just so long. To get there we will need lost home value to begin to be significantly recovered and unemployment going down due to the growth in JOBS especially when it comes to higher paying jobs.

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