BREAKING: Major HECM Changes Announced

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HECM-to-HECM Refis Targeted, Appraisal Scrutiny & More

Late last Thursday afternoon we received word that the Department of Housing and Urban Development (HUD) in cooperation with the Treasury Department presented President Donald Trump with their plan for reforming the Nation’s housing finance system and the Home Equity Conversion Mortgage program. This was in response to President Trump’s March 2019 memorandum for housing finance reform.

First the good news- there are no indications of further HECM principal limit factor (PLF) reductions or dropping the current interest rate floor. Second- you may want to watch the current national lending limit for federally-insured reverse mortgages. HUD is recommending Congressional approval to…


BREAKING: The CBO proposes 4 major HECM changes

HECM, changes, CBO, Congressional Budget Office

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Despite improved HECM outlook, the CBO recommends four major changes to the reverse mortgage program

In August 2016 AARP recommended the elimination of the HECM ‘line of credit’

While FHA recent reports show a positive financial outlook for the fiscal year 2020, the CBO issued a report today proposing 4 major potential reforms to the HECM to reduce long term risks to the taxpayers. The Congressional Budget Office provides budget and economic data to Congress or the legislative branch which sets their priorities. In essence, they are the watchdog for the nation’s purse.

1-Make FHA a direct lender. Under this proposal, lenders would do the leg work or marketing and originating the loan, while FHA would make the disbursements directly to the homeowner. In addition, the government would service the loans. The CBO acknowledges significant drawbacks in scaling to manage a large number of loans…

HECM Challenges: Less Money-Higher Costs?

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The good & the bad from recent HECM changes

Sudden industry product changes are always coupled with challenges. Reverse mortgage professionals are seeing first-hand the impacts that HUD’s October surprise will have on borrowers seeking to refinance and payoff their mortgage and those seeking to purchase a home with a HECM.

For several weeks on this show, we’ve run down several short and long-term consequences of HUD’s reduced lending ratios, the returns of origination fees,  and new insurance premium pricing. Today we are going to look at two scenarios- the borrower with a higher mortgage balance and a HECM for Purchase scenario.

Despite the financial assessment, several borrowers who would meet the guidelines are seeking to eliminate an existing mortgage who still have a nearly 50% existing loan-to-value ratio. In this example, we have a 72-year-old single borrower with a home valued at $375,000 and an outstanding mortgage balance of $175,000 being well under 50% of the home’s present value. Prior to October 2nd, this individual would only need to come in with $125 at closing after the lender credited or waived the origination fee. However, that same borrower would need to come in with over

…  Download the video transcript here.
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The Shrinking HECM?

Challenges to HECM Growth & Measuring Success

Reverse mortgage endorsement volumes have continued their slide after a brief recovery. Despite the increased acceptance of the press and financial planning community and the ever-growing need of soon to be retirees, the Home Equity Conversion Mortgage industry finds itself challenged to grow. Welcome to the Industry Leader Update.

Perhaps we are using the wrong standard by which we measure our industry’s success in reaching age-eligible homeowners. After all, can we honestly say it is an apples-to-apples comparison to compare early HECM volumes with their limited loan qualification guidelines with the reverse mortgage of today?
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Download a transcript of this episode here.

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