The HECM’s 2021 performance likely best 2020

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It’s less about preserving equity and more about cash flow

With millions of first-time homebuyers finding few suitable housing options and tenants enduring the ravages of rent hikes, some are sitting on a mountain of home equity whilst needing a significant boost to their monthly cash flow.


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What do strippers, casinos, and groceries have in common? It’s bad enough to be forced to foot the bill of your own company’s audit and financial monitoring. Reverse mortgage servicer Ocwen Financial paid over $44 million dollars to cover the costs of monitoring services to Fidelity Information Services as part of their agreement with the state of California for its investigation of claims that Ocwen did not produce the required paperwork related to the state’s Homeowners Bill of Rights. The servicer alleges the auditor burned through the budgeted money allocated for a two year period in just 11 months, paying for strip clubs, casinos, liquor, and groceries. They also claim that FIS auditors watched videos on company time, left without clocking out, and inflated daily hours worked and mileage expenses. F.I.S. flatly denies the allegations. The auditing firm’s contract was terminated by the court under a new consent order.

download-1Fraud comes in all shapes and sizes and it wasn’t from a loan officer or financial professional. Court papers allege a Chicago contractor, Mark Diamond, of scamming more than $10 million in a repair scheme that targeted older homeowners . In all there are an alleged 122 victims- most women, African-American and in their 80’s.

Retirement Views May Expand Reverse Market

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Changes In Retirement And The Reverse Mortgage Market

In recent years American’s views on retirement have changed substantially. Many are working longer not from choice but need. Dan Gorin, supervisory policy analyst for the Federal Reserve said “The definition of retirement has changed dramatically. In the past when we asked people surveyed, those who were planning to work forever had answers that were twofold; some said ‘I like to work,’ and some said, ‘I need the money.’ More recently, more people saying they’re never going to retire because they need to work.” What is ironic is that only 8% of those aged 62 or older have even considered a reverse mortgage and 2% actually took one according to a nationwide survey conducted last December by the RAND American Life Panel.

Reverse Mortgage Market News

So what are the other 92% doing? It may boil down to denial and resistance in seeking assistance. Gorin says fewer than half, yes half of Americans actually seek advice on housing and retirement finances. This is tragic as the the home represents the majority for even moderately affluent individuals pre-retirement wealth.  Many Pre-retirees are aware of the benefits of non-taxable home sales gains, mortgage interest tax deductions and energy tax credits but oblivious of the assets full potential when employed in a comprehensive retirement plan. Not surprising since most senior homeowners have no experience in converting debt into cash flow. This chart from the American Housing Survey in 2007 shows the sleeping giant of home equity with 64% having no mortgage whatsoever and 35% holding some combination of a mortgage, second or line of credit. Today’s retirees overlook their home being more concerned with equity security than income security. Equity security is hard-wired into the American psyche. Work, save, payoff your mortgage and retire with no mortgage payments as you transition into the fixed income years of your retirement. Income security however, lends itself more to truly solving the most vexing issue in retirement…

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