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The Cost of Change


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Four Future Impacts of Recent HECM Product Changes

reverse mortgage newsWith August HECM endorsements hitting a nine year low of 3,200 plus loans many are beginning to ponder the long term effects of HUD’s recent spate of changes to the federally-insured reverse mortgage program. August’s numbers show the lowest monthly volume of endorsements and three trailing months since June 2005 when only 3,139 HECMs were endorsed. Perhaps many can empathize with the statement “Change is the process by which the future invades our lives”.

It would seem that reality has certainly invaded the reverse mortgage industry. The reality of recovering from a historic housing crash, stemming the tide of foreclosures due to technical defaults and the protection of non borrowing spouses. Such actualities have led to numerous reductions in principal limit factors, the elimination of the standard HECM, and distribution restrictions in the first year. All which leads to the question, what is the true cost of change?

First these changes will  diminish the potential of what many saw as the promised land for our industry; the baby…

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  1. Government ruins yet another necessary, viable product – stick to running for office and kissing babies – leave the rest of the world alone!

  2. A frank and honest article. Especially good to be reminded that our industry over reacted to “Technical Defaults” which forced foreclosures at the height of the housing crash. A little forbearance would have allowed the housing market to rebound to mitigate losses.
    We also seem to have forgotten that our government forced “mark to market” which triggered the crash yet we persist in hanging the blame on “unscrupulous lenders and loan officers”. It’s laughable

    • Jim,

      What evidence do you provide that “a little forbearance would have allowed the housing market to rebound to mitigate losses.” Are you generalizing or have you seen stats that show your argument?

      Did the “mark to market” position come from governmental sources, FINRA, or the accounting industry? Investors deserve to be informed on the current condition of the assets upon which their investments are made. You are advocating the interests of the industry over the interests of its equity investors and lenders who must rely upon the honesty and integrity of management. No one is happy with the results but swallowing the problem when we did was the right answer even in many of minds to this day.

      • Cynic, Property appreciation from a 40 percent drop.
        FASB yes but Sarbanes Oxley as you might recall.
        You make it sound like the “equity investors” and Lenders were completely unaware of the underwriting standards in place or the universal belief that property appreciation would keep everything in balance. Loan officers weren’t making the rules or setting the standards, bankers and investors were, and they were completely aware of the true value of their portfolios and to assert otherwise is laughable.

        • Mr. Spicka,

          Sarbanes-Oxley, really? For decades before that legislation was even thought of, the accounting industry was debating what assets should be reflected at market value on the balance sheet. In 1971 when I took my first accounting courses, this was an important subject along with its application.

          Your response is exactly what I mean by those in our industry attempting to be experts outside of their field(s) of expertise and beyond their level of competence. If you feel I have thrown you under the bus, it was not me but your insistence (you stated it and argued it) that government somehow was on the cusp of creating mark to market; government was a very late comer.

          (The opinions expressed in this reply are not necessarily those of RMS or its affiliates.)

  3. In 6 years we went from 15,000 per month to 3,200 per month, down 5x. In those same 6 years, we went from 3,000 HECM LO’s nationwide (then at Wells Fargo, BofA, Met Life, Finn Freedom) and 70% of all selling REVERSE in 2007 were with these 4 firms, and now all 4 are GONE from Reverse. Talk about a roller coaster ride. I’d venture to say today 15,000 LO’s are doing these 3,200 loan or about 1/4 of a loan per LO. Overall, the average LO appears to be selling about 1/20th of what they once were selling. Thank goodness this is not the case for myself.

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