A Dysfunctional Marketplace?


The Mortgage Professor Examines the HECM Marketplace

reverse mortgage newsDysfunction: abnormal or impaired functioning of a person, organ, or in our case Home Equity Conversion Mortgages. Is our market truly dysfunctional? If so, what corrections can we make to better expand our reach to eligible homeowners?

Some people report on what is. Others ask the more difficult questions of ‘why’ and how to fix it. Jack Guttentag, also known as the Mortgage Professor is the latter. His recent column in Wharton University of Pennsylvania’s website should grab the attention of every reverse mortgage professional. Guttentag opens stating, “More seniors should be funding their retirement years by drawing funds from their home equity through reverse mortgages. But not enough homeowners do it because of a dysfunctional HECM market, as well as fear, ignorance, and distrust of reverse mortgages that make seniors stay away.” Point well taken since industry estimates show us having a mere 2% market penetration of…

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The Call for a Low-Cost HECM


A Call for the Return of the HECM Saver?

reverse mortgage newsIn October 2010, the HECM Saver was introduced giving borrowers considerably lower upfront FHA insurance premiums in exchange for lower lending ratios or principal limits. Three short years later the Saver was eliminated from the Home Equity Conversion Mortgage Program. Ironically, it was this now-eliminated program that spurred considerable interest in the HECM within financial planning circles. Today, some retirement experts are calling again for a low-cost reverse mortgage.

When HUD eliminated the HECM Saver it also increased the upfront or initial mortgage insurance premiums for those utilizing a high percentage of available funds. In their reengineering of the program they baked in disbursement options that offered lower premiums for…

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A Perversion of the HECM?


AARP Frowns Upon Strategic Use of HECM in Portfolio Management

aarp-1Creativity unlocks potential markets and opens up possibilities. It also makes you a target of critics. In recent years the long overlooked principal limit growth factor (or as many refer to it as the line of credit growth rate) has garnered a second look by financial professionals and our industry as a potential means of managing risk in a retirement portfolio.

“The use of reverse mortgages to hedge investment portfolios is a perversion of the original intent of the HECM Program, a misuse of FHA insurance, and puts the FHA insurance fund,” wrote AARP in a recent post. “HUD should take steps to ensure that homeowners who need money have access to HECMs, but should prohibit the use of HECMs for portfolio hedging.”

A perversion of the HECM program’s original intent? We have revisited the Home Equity Conversion Mortgage’s intent citing the language in which the program was created. Nowhere does it mention…

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Sacred Cows



HECM Line of Credit (Principal Limit) Growth Rate in AARP’s Crosshairs

reverse mortgage newsSacred cows. Those tenets or beliefs that have been long held above reproach and which are seen as immune from criticism. For the Home Equity Conversion Mortgage, one benefit has been largely left unscathed, that is until now. AARP is recommending the elimination of the principal limit growth factor, or as many refer to it the credit line growth rate feature.

There are many competing and cooperating opinions that are voiced when HUD makes revisions to the federally-insured reverse mortgage program. Industry stakeholders, trade groups and consumer advocacy groups. While all groups stated goal is to serve the needs of aging homeowners, the proposed policies have profound differences in implementation, and most importantly on the future appeal and accessibility of the HECM to future borrowers…

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What’s Stopping Them?

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Academic study links consumer knowledge to HECM demand

Misinformation, fear, a biased media? Are these the factors stopping older homeowners from utilizing a reverse mortgage?

reverse mortgage newsA recent report entitled “Reverse Mortgages: What Homeowners Know and How it Matters” states that knowledge of the HECM product is strongly associated with consumer demand. Today the knowledge of reverse mortgages in the general public is fairly low. The report is co-authored by Dr. Thomas Davidoff, associate professor for the Strategy & Business Economics Division at the University of British Columbia Sauder School of Business. Davidoff focused on the level of financial literacy amongst homeowners 58 and older and how their knowledge of the reverse mortgage influences the overall demand for the product.

Surprisingly 97% of survey respondents have heard about reverse mortgages with only 2% having any practical experience with the loan…

 

Download a transcript of this episode here.

Looking for more reverse mortgage news, commentary and technology? Visit ReverseFocus.com today.

Be Careful What You Say

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*Note: Unintentional error mentioned in the video regarding the HECM line of credit calculation has been corrected in the transcript. The HECM line of credit growth rate is based on the current month’s interest rate charged + 1.25% FHA mortgage insurance charge. 

Borrowers are not the only ones who misunderstand the HECM

hand-over-mouthA few days ago I was speaking with a very skilled and experienced trainer in our industry. We both share a passion for educating, motivating and empowering reverse mortgage professionals. During our short chat we landed on the topic of key provisions of the HECM program that are often misunderstood not by borrowers, but by some well-meaning reverse mortgage professionals.

Educating our potential borrowers is key but it can be counterproductive if we are dispensing inaccuracies. Let’s examine two of the most commonly misunderstood aspects of the Home Equity Conversion mortgage.

1- Who FHA Insurance actually protects. Many loan officers mistakenly tell their borrowers of the wonderful protections that FHA insurance provides. After all who doesn’t like to see some benefit for the premiums they pay?

 

Download a transcript of this episode here.

Looking for more reverse mortgage news, commentary and technology? Visit ReverseFocus.com today.