The Home Equity Conversion Mortgage has come under increased scrutiny with HUD’s annual reports to Congress and the ensuing actuarial reports showing wild and unpredictable swings i
Continue readingWill HECM Changes “Stop the Bleeding”?
NEW HECM Final Rules Begin Sept 19th
HECM Final Rule Changes Begin Tommorw- Part 2: Interview with RMI’s John Lunde
HUD’s HECM Final Rules go into effect tomorrow (9/19/2017) and include in part:
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- For fixed rate HECMs, only a full-funded LESA may be used.
- Partially funded LESA’s will distribute LESA funds two times a year to the borrower for the payment of property charges. Fully funded LESAs will directly pay the insurance or taxing authority, not the borrower.
- Initial distribution limits will remain in effect for the first 12 months, but cannot be reduced below a 50% distribution cap without additional rulemaking.
- Sellers are allowed to pay fees required to be paid by the seller under local or state laws, including the purchase of a home warranty policy.
- The seasoning of non-HECM liens looks at the 12 month period prior to the HECM closing.
- HELOCs (home equity lines of credit) are excluded from the 12-month seasoning requirement but are subject to first-year distribution limits.
- All HECM products and features must be disclosed to the borrower in a manner that is acceptable to the FHA Commissioner, regardless of the products offered by the particular HECM lender.
- Borrowers may lock in their Expected Interest Rate (EIR) prior to the date of loan closing or lock in their rate on the day of closing.
- The payoff of unsecured debts not secured by the property as defined by the Commissioner is a mandatory obligation.
GET FULL OFFICIAL TEXT OF FINAL HECM RULES HERE
John Lunde is the president and founder of Reverse Market Insight (RMI). They closely track the reverse mortgage (HECM) industry data points and trends.
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HECM Changes: Followup Q&A with Survey Results
Follow up on two biggest questions on HUD’s changes to HECM
We had over 700 participants in last week’s webinar discussing HUD’s dramatic changes to the HECM program. Two of the most popular questions are answered along with the surprising results of our in-session surveys.
BREAKING: HUD Cuts PLF Factors, % Rate Floor & Increases Upfront FHA Insurance Premiums
Without any prior warning or industry comment, HUD formally announced an increase of upfront insurance premiums for all borrowers, regardless of initial distributions, to 2% upfront, and .5% for ongoing mortgage insurance premiums. The agency stated the need to ensure the continued economic sustainablity of the HECM program and its fiduciary responsiblity to taxpayers.  [See Mortgagee Letter 2017-12] [ Wall Street Journal Article View on Facebook to see full article]
HUD has lowered the interest rate ‘floor’ from 5.06% to 3.00% in it’s PLF tables, essentially pushing lenders to compete on interest rates and margins. We expect to see more lenders switch from the monthly to the annual adjustable LIBOR index in response. In addition the new PLF tables accomodate a rising interest rate enviornment with lending ratios provided as high as up to 18.875%, wheras the previous tables zeroed out lending ratios at 10%. [New 2017 PLF Tables] [Old 2014-2017 PLF Tables]
In our analysis, the reduction in ongoing FHA premiums will significantly reduce the ongoing growth of the HECM’s Principal Limit (available funds), or what many refer to as the line of credit. This development will substantially change several strategies touted in recent years, such as the Standby Reverse Mortgage, and those seeking to use increasing available funds as a hedge against unexpected financial shocks in retirement.
Principal Limit Factor will be reduced from 64% to 58% on average and an approximate 20% reduction available funds for most borrowers:
* 20% reduction with new PLFs and lower interest rate floor after October 2nd, 2017
HUD is soliciting feedback from interested parties until September 29, 2017. Feeback can be submitted to: answers@hud.gov
Official Mortgagee Letter 2017-12 “Home Equity Conversion Mortgage (HECM) Program: Mortgage Insurance Premium Rates and Principal Limit Factors”
What are your thoughts? Please leave your input in the Comments section below, and share this post on social media using the Twitter, Facebook and LinkedIn icons at the top of this page. Thank you!
Carson talks reforms, Scammer sentenced, SEC warns of de-listing
Scammer sentenced, Carson talks reverse mortgages, Walter faces possible de-listing from NYSE
In this week’s edition: HUD Secretary Ben Carson supports reverse mortgage program while speaking for the need for reform. The New York Stock Exchange puts Walter Investment on notice. US Postal Service nabs reverse mortgage scammer in a sting operation. The best & worst uses of a reverse mortgage.
While Dr. Ben Carson is settling into his new job as Secretary of the Department of Housing and Urban Development, he did take the time to note both his support and the need for reforms of the Home Equity Conversion Mortgage program. Speaking before the Leading Age Florida convention, Carson stated “More and more of our citizens are over 65 years of age … about 15 percent, nationally. And, as our nation ages, we must become wiser, smarter, while expanding choices for seniors.”
A successful con requires confidence on the part of the scammer. This time Kemal Barnes had the tables turned on him after scamming over $120,000 a 79-year old Texas woman according to the Boston Globe. Barnes began his con game while living in his native Jamaica and continued while living in Massachusetts. The victim’s son notified authorities in 2015 after
The Trump Era & The HECM
Good News for HECM, Not So Much for Housing Programs
President Donald trump embodies the essence of a political wrecking ball in Washington D.C.- a city known to cling tightly to political traditions of governing and supporting long-standing social programs, despite our ballooning deficits.
While the President weathers opposition from both Democrats and Republicans alike, his administration’s draft 2018 budget for the Department of Housing & Urban Development reflects populist sentiments of a smaller, efficient government with parsimonious allocations for social program spending. Many feared the populist agenda would gut essential HUD, programs, and more specifically, the Home Equity Conversion Mortgage program.
Politico obtained a copy of the Trump administration’s preliminary HUD budget revealing plans to gut $6 billion from several programs including the outright elimination of the Community Development Block Grant, neighborhood initiatives, and a housing program for veterans. Despite these unpopular cuts, the HECM program was spared and even strengthened.
Two changes stand to liberate the HECM – the removal of the annual cap and the erosion of the unchecked powers of the Consumer Financial Protection Bureau…
The HECM’s State of Affairs
Irrelevant HECM endorsements and recent developments
The Irrelevancy of Historical Volumes
A sense of frustration can set in for those expecting rapid expansion of loan volume back to our pre-recession levels.  After several years of rapid expansion culminating in 2009’s record endorsement tally of 114,629 loans, last year’s endorsements were a sum total of 48,000 endorsements. Such comparisons are suspect for a number of reasons- a simpler product offering, rapid home appreciation, generous underwriting guidelines, increased loan complexity, lending ratio reductions, and the post-recession and housing crash.
Considering the headwinds the HECM has endured we can claim both a modicum of success and a measured optimism for future market expansion. However, fixating on the apple and oranges comparison of historic volumes ignores larger macroeconomic forces and serves only to distract us from more pressing matters.
Too good to be true?
One hurdle to increased consumer adoption of the HECM is the fear that if it sounds too good to be true, it probably is. The ability to leverage an illiquid asset and transform it into a potential source of predictable cash-flow is an attractive yet counterintuitive proposition for many Americans wanting to age in place. Sweetening the deal is the fact that the HECM’s unused available funds, or principal limit, grows each year based on the current interest rate plus the MIP. Caution must be exercised when making claims as to just how large
HECM Changes Coming This Fall
Despite executive order, more HECM Changes coming this fall
One would think our industry may catch it’s collective breath from the rapid nonstop pace of new rules and regulations for the Home Equity Conversion Mortgage. Such hopes were bolstered with the February announcement of President Trump’s Executive Order curbing federal regulations. However, it appears that HUD’s final rules will in fact be implemented this fall. What do such changes hold in store for the reverse mortgage industry?
Perhaps it is fitting that HUD’s final HECM rule will arrive just days before the fall season officially begins on September 19th. The rollout will come in three phases: self-implementation, changes to the Single Family Housing Policy Handbook, and future mortgagee letters. During the National Reverse Mortgage Lenders Association meeting last week in New York City, the association’s president and CEO Peter Bell expressed their comfort on the direction of the coming rules changes.
Some additional changes are welcomed by industry participants. These include ….
Big Changes Ahead in 2017
3 reasons why you should expect big changes in 2017
The political landscape changed with a sudden seismic shift felt across the world. Domestically the impacts of a new populist, small government philosophy may manifest themselves in a variety of ways that will impact reverse mortgage lending this year.
Slashing Domestic Spending:
The Trump administration is contemplating substantial cuts in excess of $6 billion dollars from HUD’s budget, according to documents obtained by the Washington Post. While alarming to some, would such cuts, if realized, substantially impact the Home Equity Conversion Mortgage? The short answer is no as most are speculated to be directed at housing initiatives such as Section 8, community housing projects and assistance programs for elderly low income Americans. Some industry participants however, wonder if continued budget subsidies for the HECM program would place the program in the crosshairs of the federal government’s efforts to reign in domestic spending.
Trump vs. The Fed:
Will Trump regret his comments about the Fed? Throughout his presidential campaign, Donald Trump criticized the Federal Reserve and it’s chair Janet Yellen, of maintaining artificially low interest rates to help Hillary Clinton. In December the Fed raised interest rates on quarter of a percent, the second rate increase since June 2006. Central banks have been reluctant to raise interest rates in the wake of the 2008 financial crash, and home prices have consequently been on a tear. Today, the Fed is projecting three rate hikes this year alone. The impact would be felt by
NEW HECM Rules Announced
HUD Announced New Finalized HECM Rules for 2017
HUD announced their finalized rules enacting several policy changes to the Home Equity Conversion Mortgage (HECM) program which will go into effect later this year. What do these changes hold in store for interest rate caps, disclosure requirements, and new loan assignment guidelines and how will the final rules change the face of reverse mortgage originations? Welcome. This, is the Industry Leader Update. I’m Shannon Hicks.. This episode is brought to you by ePath Digital, providing real-time leads for today’s reverse mortgage professional.
After much anticipation and speculation, HUD announced their finalized rule changes for the Home Equity Conversion Mortgage. The rule changes were first proposed and opened to public comment last May. The rules could be seen as a continuation of the agency’s mission to solidify the reverse mortgage program under the Reverse Mortgage Stabilization Act of 2013 which gave HUD expanded authority to quickly enact additional rule changes as they saw fit. The new rules will go into effect September 19, 2017.
When it comes to reverse mortgage originations, loan officers and lenders will be required to…
