A report released in June by the U.S. Census Bureau predicts that people aged 65 and over will soon outnumber children under 5 for the first time in history.  Furthermore, the population aged 80 and over is expected to increase 233% between 2008 and 2040, a phenomenon never before seen. The population aged 65 and over meanwhile is expected to grow 160 %, compared to 33% for the total population of all ages.  These predictions encompass global demographics- not just those of the United States.

An increasingly older population presents many new challenges. Health care and social security are just two of the programs under increased scrutiny.  Economic models may need to change as individuals spend larger portions of their lives in retirement.  An older population may lead to labor supply issues, with the question of how the younger population will be able to support all their elders.

The report also points out that an increasing share of the elderly population will be located in developing countries in the years to come.  This could pose a new set of challenges.  The developed health care and social service networks of Europe and the United States have not yet come to many parts of the developing world.  With chronic noncommunicable diseases are now the major cause of death among older people in both the developing and nondeveloping world, the global health care system faces a new problem of treating diseases like cancer and heart disease throughout the globe-and dealing with the aging populations once they do.

It is unsurprising that the population is aging, and that, in the years after the baby boom, the elderly population will soon be a larger proportion of the world’s population.  As birth rates decline, especially in the developed world, it is also logical that the older members of the population may outnumber the younger ones.  But the challenges that come from these problems remain to be resolved.

Within the reverse mortgage program, it will be interesting to see if, over time the minimum age of the borrower is pushed back to reflect the longer lifespan.  One wonders if the percent equity available from the home will decrease to yield a more sustainable program as people live longer. And one expects the program to grow as an increasing number of seniors become eligible for it.

In the beginning of July, New Hampshire passed HB610, a bill banning yield spread premiums (YSPs) and including more restrictions about cross-selling. The bill goes into effect tomorrow, and, as it does, Generation Mortgage announced to its brokers that it is pulling out of the state.  The bill was passed to help ensure that brokers are not compensated extra for selling borrowers higher interst loans (which is an even larger concern on the forward mortgage side).

However, lenders trying to avoid HB610 and similar legislation may be out of luck– the Federal Reserve is trying to push the mortgage industry to pay originators in the form of a flat fee, though some experts believe that compensation based on interest rate would still be allowed. If the federal legislation goes through, lenders will be hard-pressed to find states that allow YSPs.  Even if the legislation does not pass, the debate and abuse on the forward mortgage side makes similar state legislation more likely.

Representatives from many of the mortgage industry’s leading mortgage servicing companies met with members of the Obama administration in Washington on Tuesday.  The meeting was called to discuss ways to improve the administration’s housing rescue plan and loan modification program. It was called in light of the fact that the program, while launched in February to great fanfare, has only completed trial modifications on over 200,000 loans so far. The administration’s goal remains 500,000 trial mortgage loan modifications by November 1st.  In what is perhaps an effort to increase the pressure on mortgage servicers to modify more loans, the Obama administration also announced that it remained on track to release a report on the individual mortgage servicing companies by August 4th. The report will contain the number of trial modifications offered to eligible borrowers and the number of trial modifications currently under way.

Some seem to fear that adding additional pressures to the mortgage servicers will cause banks to take additional losses on the loans. However, it is commendable for the administration to push for the loan modifications–especially in a program that has had so many complaints over the past few months.  I’d argue that while the losses taken by the banks will in aggregate certainly be larger than that taken by the homeowner whose loan was not modified and gets foreclosed upon, the significance of the foreclosure is greater for the homeowner than for the bank. Furthermore, it is perhaps easier for the administration to then aid the bank, rather than aid each of the millions of homeowners whose homes have been pushed towards the brink of foreclosure as a result of the economy-the people who this program was designed to help.

The Case-Shiller Index from January 2000 - January 2009 shows the housing bubble well. Many believe the worst is now over.

The Case-Shiller index for May indicates that the housing market may have hit bottom in April. Home prices continued their upturn in May, with prices down only 17.1% from last year, versus 18.1% in April.  Prices also increased in May versus April by a half a percentage point, the first positive monthly return on the index in three years! However, when adjusted for seasonality, the prices show a slight drop.

Nonetheless, the positive message from the data is clear. While in February we reported that all 20 metropolitan areas on the Case-Shiller index had experienced a price decline from the previous month, this month, only 5 of them did: Las Vegas, Phoenix, Miami, Seattle, and Los Angeles.

Despite the decreasing rate of decline, analysts still don’t expect the market to stabilize much less prices to rise until late next year at the earliest. However, the market has exceeded expectations recently- maybe it will rebound sooner as well.

This week’s reverse mortgage rates are below. These rates are effective for the week beginning July 28, 2009.

APR:

HECM CMT 300: 3.47

HECM CMT 325: 3.72

HECM CMT 350: 3.97

HECM LIBOR 250: 2.785

HECM LIBOR 275: 3.035

HECM LIBOR 300: 3.285

Expected Rates:

HECM CMT 300: 6.62

HECM CMT 325: 6.87

HECM CMT 350: 7.12

HECM LIBOR 250: 6.31

HECM LIBOR 275: 6.56

HECM LIBOR 300: 6.81

Rates for the HECM LIBOR and HECM CMT rose again this week, though the APRs for both products declined. The expected rate for the HECM LIBOR rose by a tenth of a point this week, while the expected rate for the HECM CMT rose by seven hundredths of a point. One would hope that the rates will stop rising soon.

Wilmington Savings Fund Society (WSFS), FSB announced earlier today that effective today they will begin winding down 1st Reverse Mortgage Company’s operations. Starting on July 31st, 1st Reverse will no longer accept any new applications. They remain committed to completing all loans currently in the pipeline (or in the pipeline by  July 31st). This includes processing, underwriting and funding the loans.

The news about 1st Reverse Mortgage is slightly disconcerting in light of Senior Lending Network folding earlier this month. While 1st Reverse was not as large of a player as Senior Lending Network, it did complete a significant volume of loans. Although the time seems ripe for the reverse mortgage industry to grow and prosper, the folding of these companies lends some support to the argument that the problems in the real estate market are negatively impacting the reverse mortgage industry, rather than providing the industry with enough business to flourish despite the economy.

As the House continues to debate their appropriations bill, much recent reverse mortgage news has covered speculated and proposed changes in the bill, including questions as to whether the increased property value limit ($625,500) will be extended, and how the FHA will avoid the $798 million taxpayer subsidy requested for the program.  The bill approved by the House Appropriations committee on last week instructs HUD to reduce the principal amounts borrowers can receive through the program.

However, the most important point at this time in the bill’s process is that nothing has been finalized. The bill must be approved by the House, then the Senate, then a Conference Committee made up of members from both houses of Congress meets to reconcile changes in the bill, and then the President must sign it for it to become law.  This whole process will likely not be completed until well into the fall.   I therefore think that at this time, the best course of action is not to panic or react to proposed changes before they become a reality. Obviously lobbying has its place in the legislative process, but at an early draft stage, it seems to be unnecessary for the industry to sit on pins and needles reacting to every change (or proposed change) to the bill before it is in front of the whole Congressional body.  And even if a change passes the House or the Senate that is unfavorable, it is still likely that it might not pass through a conference committee in tact. Let’s give the complexity of the legislative process its due.

The National Association of Realtors revealed today that home sales continued their increase in June, with the sale of previously occupied homes rising 3.6% from May. It was the highest number of sales since October of 2008 and beat analysts expectations by 50,000 homes. In perhaps more telling numbers, the median sales price was $181,800. While this is up from $174,700 in May, it is down from the $215,000 median sales price in June of last year.

Meanwhile, other reports are asking whether housing prices may have stabilized. The Federal Housing Finance Agency’s housing price index, based on repeat sales of the same houses, rose 0.9% in May from April. It is nearly unchanged since November (source: Wall Street Journal, front page, 7/23/09).  However, the index seems to be deceiving. It does not include subprime or other unconventional mortgages, which are the source of many of the problems in the housing market and which appear to have driven down the prices throughout the country.

These signs seem to be positive for the housing industry. But jobless claims are still high, and foreclosures, new homes, and unsold properties do not seem to play a large role in these reports. While it is nice to see two indicators moving in such a positive direction, other downward indicators seem to mean that it might not be wise to get too optimistic just yet.

As in any industry, there are good reverse mortgage officers and not so good reverse mortgage officers. The following are some ways to help separate the good from the bad.

1. Does Not Return Phone Calls-  Communication is an important part of the relationship between a reverse mortgage officer and their client.  The process is not always straight-forward, and the borrower may have questions along the way.  Therefore if the reverse mortgage officer regularly does not return calls or does not return calls for long periods of time, it may be time to look elsewhere.

2. Unavailable – In the same vein as #1, if a reverse mortgage officer is continually unavailable, it is hard to complete a reverse mortgage transaction.  If the borrower wants to meet with the reverse mortgage officer or has a question for them, the borrower should be able to reach them.  If they continually can’t, it may be time for the borrower to find a reverse mortgage officer they can talk to.

3. Part-time Gig – While economic times have meant that people may be trying to add extra jobs to make up for a loss of income, the point that your loan officer is more likely to pay more attention to your case and do a better job on the file if getting dinner on the table is on the line is a valid one.  Especially if your reverse mortgage officer has another job in a completely unrelated field, you may want to find one who specializes in their trade and can give your file the attention it needs… full-time.

4. Weary Traveler – Although economic times have led more people to switch jobs recently than they may have liked, be wary of a reverse mortgage officer who has switched companies extensively over the course of their career. There may be a reason why.

5. Inconsistent Answers/Unknowledgable – Reverse mortgages may not be the most basic product on the market, but a good reverse mortgage officer should be able to answer most questions you may have and know where to go to get the answers to the rest.  Beware of reverse mortgage officers who change their answers or are inconsistent.  Also beware if there are many questions that they cannot answer.  And while most states require loan officers to be certified, if a borrower is suspicious they can always check to make sure their officer is licensed.

6. Pushy or Impatient- A reverse mortgage is a significant financial decision, so beware of reverse mortgage officers who try to push the decision on the borrower or hurry the borrower through the process.  The loan officer should make sure that the borrower is comfortable with the process. If the borrower feels uncomfortable, they might want to seek out a reverse mortgage officer who will make them feel more so.

7.  Behavior problems- See if any complaints are on file against your reverse mortgage officer or their company. If there are, borrowers might want to receive an explanation and possibly a different officer to work with.

Thanks to 6 Signs of a Crummy Real Estate Agent for inspiration.

Another component to aging in place safely is safe driving.  Many suburbs and rural areas are not easily navigatable without the ability to drive.  This means that when seniors lose their mobility and/or ability to drive safely, many of them are forced to move out of their homes.  Other times, seniors who choose to stay become a part of a “homebound elderly” population,  which does not make aging easy.

In the last week or so, AAA has announced a number of resources to help senior drivers stay safe on the roads. Programs like Carfit help ensure that senior’s cars are safe so that they are less likely to be killed in a crash. Drivesharp, one of the newest AAA offerings, is a computer software program that strengthens the brain’s ability to process what drivers see, so that they can focus better, keep track of more on the road, and react faster when driving. Many of these problems are more likely to plague seniors, and improvements in visual processing decrease crash risk.  Roadside Review and I Drive Safely’s Mature Drivers Course are two other examples of programs targetted towards helping senior drivers improve their skills and abilities so that they can stay on the road longer, prolonging their ability to remain in their home.

For more information, visit www.aaa.com or www.aaaseniors.com.

This week’s reverse mortgage rates are below. These rates are effective for the week beginning July 21, 2009.

APR:

HECM CMT 300: 3.48

HECM CMT 325: 3.73

HECM CMT 350: 3.98

HECM LIBOR 250: 2.786

HECM LIBOR 275: 3.036

HECM LIBOR 300: 3.286

Expected Rates:

HECM CMT 300: 6.55

HECM CMT 325: 6.80

HECM CMT 350: 7.05

HECM LIBOR 250: 6.21

HECM LIBOR 275: 6.46

HECM LIBOR 300: 6.71

Expected rates for the HECM LIBOR and HECM CMT rose dramatically this week, increasing by over a tenth of a point for each. This occured despite the fact that the APR for the LIBOR declined.

A kitchen in a universally accessible home.

Aging in place is a goal of many seniors, for good reason.  A reverse mortgage is one product that can help seniors remain in their homes, but if mobility concerns are an issue in a house that is not senior-friendly, aging in place can still be difficult.  Now, some recent developments have come together nicely to make aging in place a little easier:

Suffolk County in Long Island, NY recently ammended its housing code to state that any affordable housing built with county funds must incorporate accessible design.  Such design concepts include no-step entryways, 36 inch doorways and passageways, and an area in showers for grab bars.  Other mentioned features include homes with elevators already built-in and doors that open with levers, not knobs.

While accessible design can help people of all ages in cases of accident, disability, or injury, it is an especially important issue within the senior community.  If a property is built in a universally accessible manner, it is less likely that a senior would be unable to live there as they get older.  According to Judy Pannullo, Executive Director of the Suffolk Community Council, it costs only $700 more to build a house with universal design principals, though the cost of renovating an existing home to conform can be much higher.

Finally, programs such as the HECM for Purchase program make it easier for seniors to purchase new homes, including those that might be more accessible than their previous homes. The HECM for Purchase program allows seniors to buy a new home providing only a down payment and paying for the rest using the home’s existing equity. As a result, they have no mortgage payments during their time in the home.

More people are starting to build new homes again, or at least, that’s what the numbers from the unexpected rise in housing starts in June appear to show.  The number of housing starts rose 3.6% (or about 20,000 seasonally adjusted starts) to 582,000 units. Even larger leaps were seen in the number of housing starts of single family homes (14.4%) and the number of permits to break ground (8.7%).  Analysts had expected these values to remain unchanged from previous months.

While the number of housing starts and permits to break ground are still down around 50% from a year ago, the increase is still a sign of progress. It seems that few aspects of the real estate industry have defied analyst’s expectations recently, and the large unexpected jumps are a definite exception.  Although one wonders slightly whether developers will be able to fill all their new properties, it is good to see people building homes again. Perhaps once the new properties are completed, the worst of the recession will be over.

Part of 2 of our reverse mortgage glossary, focusing on the second half of the alphabet of some basic reverse mortgage terms. Early posts will focus on terms for beginners, but later posts will become more advanced.  The glossary will then be posted on our website.

Mortgage Terminology Part 2:

LIBOR –London Interbank Offered Rate – An international index determined on the basis of the worldeconomy and widely used for ARM loans in the United States.

Mortgage Servicer – handles reverse mortgage after it is closed; esnures terms of reverse mortgage are kept by both sides.

Principal Limit- The total loan proceeds available at origination from the reverse mortgage.

Principal Residence – The dwelling where the borrower maintains his or her permanent place of abode and spends the majority of the calendar year. The borrower may have only one Principal Residence at a time.

Processor – Person that handles reverse mortgage process between time of application and closing.

Refinance – the process of paying off one loan with the proceeds from a new loan secured by the same property.

Settlement – See “Closing.”

Title – A legal document establishing the right of ownership.

Title Search – A check of public records to ensure that a person is the legal owner of a property and that there are no liens or other claims outstanding on the property.

A new study by Northwestern’s Kellogg School of Management and the University of Chicago’s Booth School of Business revealed that 26% of borrowers who defaulted on their mortgage payments did so strategically. The study pointed out that one in six borrowers would choose to walk away if their shortfall was over 50% of their home’s equity.  This finding is especially intriguing due to the falling housing prices in areas like California and South Florida, where many borrowers have found themselves incredibly upside down on their mortgages.  These borrowers generally do not qualify for reverse mortgages even if they are old enough to be eligible, since they do not have enough equity in their homes.

However, it is logical that borrowers would not want to remain in a situation where the amount they owe on their mortgage is becoming increasingly more than their house is worth.  And especially given the current state of the economy, some of these borrowers have found their situations change such that they can no longer afford the payments in the first place. With so many homes available at bargain basement prices, it is unsurprising that borrowers might choose to try to walk away to a better situation, regardless of the negative effect it may have on their credit.

Yet this is exactly the situation the government should be remedying. Many programs to help borrowers during the recession have left out those homeowners who are dramatically underwater on their mortgages, but these borrowers (who appear to often come in larger groups as neighborhoods fall dramatically in value) are some of the ones who need the help the most and whose mortgages, through no fault of their own, no longer make financial sense.  Rather than simply becoming content to let homeowners walk away and take the hits to their credit or entrap them in their home, the government should work with lenders to establish a solution that helps bail out and reevaluate those whose mortgages are worth far more than their homes.  Both sides should be able to win from the situation, rather than the current reality in which the banks, the borrowers, and the communities lose.

The terms surrounding a reverse mortgage can be confusing. Below is the first post in our series of a reverse mortgage glossary. Early posts will focus on terms for beginners, but later posts will become more advanced.  The glossary will then be posted on our website.

Mortgage Terminology Part 1:

Adjustable-Rate Mortgage (ARM)- A loan with an interest rate that changes with market conditions on pre-determined dates.

Appraisal- A report that states an opinion on the value of a property based on its characteristics and the selling prices of similar properties or comparable properties in the area.

Appreciation- An increase in the value of a house due to changes in market conditions or other causes.

Closing – The final step after a lender approves an application. The occasion when a borrower signs loan documents, including the mortgage or deed of trust, and when closing costs are paid. Also referred to as “settlement.”

CMT – Constant Maturity Treasury – Also often known as a “treasury bill” or “T-Bill,” it helps set the interest rate for some adjustable rate mortgages.

Deed of Trust- The legal document encumbering title to a property.

Equity- The portion of the value of the property that exceeds the current amount of your home loan. If, for example, the property is worth $100,000 and the loan is for $75,000, then there is $25,000 (25% equity) remaining in your home.

Fixed-Rate Mortgage – A loan with a pre-determined interest rate that is agreed upon for the term of the loan.

HECM (Home Equity Conversion Mortgage) – The most common type of FHA insured mortgage. HECMs encompass 100% of reverse mortgage transactions in 2009, and 99% in 2008.

HELOC (Home Equity Conversion Loan) – a loan sometimes mistakenly considered similar to a reverse mortgage.

This week’s reverse mortgage rates are below. These rates are effective for the week beginning July 14, 2009.

APR:

HECM CMT 300: 3.46

HECM CMT 325: 3.71

HECM CMT 350: 3.96

HECM LIBOR 250: 2.793

HECM LIBOR 275: 3.043

HECM LIBOR 300: 3.293

Expected Rates:

HECM CMT 300: 6.42

HECM CMT 325: 6.67

HECM CMT 350: 6.92

HECM LIBOR 250: 6.10

HECM LIBOR 275: 6.35

HECM LIBOR 300: 6.60

Both the HECM Libor and the HECM CMT saw significant drops in Expected Rates and APRs this week. Hopefully the rates will continue to fall, as they have the last few weeks.

While the government’s mortgage modification and foreclosure prevention program has not been gaining as much traction as many in the administration may have wished, other states have found a different solution.  Connecticut and New Jersey unveiled their own mortgage foreclosure modification programs, and have found them to be increasingly successful.   In Connecticut, over 2,500 people have participated in the program since its introduction in July of 2008, with a 60% success rate at avoiding foreclosure. Another small number were able to negotiate stays on the foreclosures until they could find another housing option. In New Jersey, 614 borrowers have qualified for mediation, with a little over a third of them negotiating to keep their homes.

In both states, borrowers who receive foreclosure notices are sent letter by the judicial branch informing them of their eligibility for the programs, so why are the numbers so different?  40% of those eligible participate in Connecticut, but only 5% participate in New Jersey. The difference between the two programs is that in New Jersey, borrowers must go through financial counseling before proceeding to mediation.  In Connecticut, the borrowers go directly to a mediation.  Connecticut borrowers still do generally receive counseling, but it generally occurs after the first mediation.

We have spoken at length about the ways in which counseling is able to help borrowers at risk for foreclosure (as well as those considering a reverse mortgage).  However, the more hoops a borrower must jump through, the less likely they are to participate in a program. If it turns out to be true that the 35% difference in borrowers who are participating in these programs is primarily due to whether or not counseling is required, it would be an interesting case for reducing the emphasis on counseling in order to increase participation and results. Yet it would be surprising if this was the only reason for the change in participation rates.

Money Management International (MMI) announced that as of July 1, 2009, they will no longer charge borrowers for HECM counseling. A HUD approved reverse mortgage lender that is required to appear on all counseling lists given to borrowers, MMI believes they have enough grant funds to cover counseling through October 2009, at which point new grant funds will become available.

As counseling and the appraisal are generally the only two out of pocket fees a borrower must pay during the reverse mortgage process, MMI’s move could be great for a large number of borrowers.  It will be interesting to see whether any other counseling agencies follow suit.

It is important to remember that lenders cannot steer borrowers towards a particular counseling agency. However, it is great that there will now be a no-cost option on the list.

MMI will be limiting their counseling sessions to around 3,500 a month, as well.  It will be interesting to see what wait times for borrowrs begin to look like as a result.

Counseling has the potential to help large numbers of borrowers, and moves like this one will only serve to make it more accessible.

On Tuesday the Senior Lending Network, also known as World Alliance Financial Corp., announced that it would no longer be accepting new reverse mortgage loan applications.  The decision comes down from World Alliance Financial Corp.’s parent company, KBC Group, based in Belgium. KBC Group has been hard hit in the recent economic downturn, and, with the recent repurchase of Equity Key by its founders, appears to be seeking to shed its US holdings. Both World Alliance Financial Corp. and KBC Group have announced their diligence in finding a buyer or capital partner, but if they don’t, KBC Group has said it will begin to wind down World Alliance Financial Corp’s operations.

This move is destined to have ramifications throughout the industry considering that World Alliance Financial Corp. has endorsed 2,892 HECMs thus far this year, making it the fourth largest lender and holding a significant market share, around 3.4% of the market.  As a result, it will be very interesting to see which lenders pick up both Senior Lending Network’s former customers and their former leads.  Next month’s HECM volume report is likely to paint a different picture from what many in the industry have grown accustomed to over the past few months.

To follow up on today’s earlier post about foreclosure prevention, the press release below shows an example of a reverse mortgage helping save a borrower from foreclosure.  While this story focuses on one case, this scenario has become more and more common, and is a reminder of one of the most important ways in which reverse mortgages can dramatically benefit borrowers.

ROCKLIN, California (July 8, 2009) – Premier Reverse Closings (PRC), divisions of National Closing Solutions and Placer Title, along with Lend America and Generation Mortgage, recently saved a borrower from the brink of foreclosure with a reverse mortgage that closed in a record seven days from the opening of the title and settlement order.

PRC worked closely with the broker, Lend America, and the lender, Generation Mortgage, to fund the reverse mortgage just one day prior to James Atkins’ June 25^th sale date.

In order to close the loan in such a short time, PRC spent extra time addressing his existing liens and clearing his title report, verifying insurance and hiring an experienced notary to verify and witness Atkins’ signing of his loan documents. Since the terms of Home Equity Conversion Mortgages (HECM) mandate a three-day right of rescission period, PRC had to obtain and review all proper documentation in just three days, leaving one day to fund the loan after the rescission period expired.

Atkins, a pastor at a church in Missouri, was thrilled with the entire process from beginning to end. “I did all I could, but I couldn’t do anything more. I prayed with all of my heart that things would work out for the best,” Atkins said. “Lend America and [PRC] worked so hard to close my reverse mortgage, and I am so grateful they saved my home.”

Atkins’ loan officer, Ed Sanchez with Lend America, knew that this could be done in a short amount of time, but is still so grateful for how quickly it could come together. “The teamwork between my processing team, the lender and PRC was absolutely outstanding,” said Sanchez. “It was truly a team effort for this hour-by-hour deadline that we faced.”

PRC’s Senior Vice President of Operations, Tina Meilinger, acknowledged this closing was an anomaly.

“Our PRC team has experience in closing more than 115,000 reverse mortgage loans, but none in just seven days,” said Meilinger. “This is definitely a first, and has raised the bar, with hopefully more transactions to follow.”

Meilinger knows that PRC plays an integral role within the reverse mortgage process, saving many borrowers from financial hardships daily.

“PRC is proud to have helped in the process of saving Mr. Atkins from foreclosure,” said Meilinger. “There is nothing better than knowing Mr. Atkins can have his family over to his home after church on Sunday, or that he will never have to worry about making monthly mortgage payments.”

The housing crisis is not over for many borrowers. According to an article in the Wall Street Journal, the percentage of mortgages 60 days or more late rose to 5.65% in May, up from 5.48% in April. It is the highest level on record.  In addition, the number of homes in the foreclosure process jumped, after remaining stagnant for a few months due to several moratoria. Around 257,000 homes entered the foreclosure process in May, up 5.7% from April, and 34% from a year ago.

What is perhaps most interesting about these statistics is that the number of subprime mortgages going into foreclosure has decreased 16% from a year ago. Yet the number of prime mortgages going into foreclosure is up 83%.  This change may reflect the effect the recession has had on middle and upper-middle class borrowers. While many of these borrowers may have had the salaries and credit scores to qualify for a prime mortgage in the past, the market has shed many white collar jobs in recent months, affecting these borrowers, many of whom had money invested in the stock market and did not see this coming.  Even so, these statistics are quite sobering.

It is important to remember that reverse mortgages can be one way for senior borrowers in these situations avoid foreclosure. For more information, see Foreclosure Prevention.

And let’s hope that next month’s numbers are better than these!

After falling from 11,660 HECMs endorsed in April to 8,396 HECMS endorsed in May, HECM volume increased slightly in June to 8,633 HECMs endorsed.  As the graph indicates, HECM volume for the year still looks like it is on track to be higher than last year.  However, one wonders if the number of HECMs endorsed will be as high as was previously thought. While the trend through April might have led one to believe that the industry would see a 144,000 HECM volume year, these trends show something more like 120,000.

Once again, the volume of HECMs is concentrated in the top few lenders, decreasing dramatically on down. Wells Fargo, the top lender, has endorsed more than twice as many loans as the number 2 lender, Bank of America. Many other lenders  have only endorsed one HECM last month.

The FHA’s complete HECM volume report for the month of June can be found here.

This week’s reverse mortgage rates are below. These rates are effective for the week beginning July 7, 2009.

APR:

HECM CMT 300: 3.53

HECM CMT 325: 3.78

HECM CMT 350: 4.03

HECM LIBOR 250: 2.801

HECM LIBOR 275: 3.051

HECM LIBOR 300: 3.301

Expected Rates:

HECM CMT 300: 6.53

HECM CMT 325: 6.78

HECM CMT 350: 7.03

HECM LIBOR 250: 6.25

HECM LIBOR 275: 6.50

HECM LIBOR 300: 6.75

Both the HECM Libor and the HECM CMT saw significant drops in Expected Rates this week, although the APR of the HECM CMT rose.

HECM for Purchase transactions may be legal in 49 states… but not in Texas.  Due to protections against homesteading in the Texas Constitution, a constitutional ammendment will be required in order to legalize HECM for Purchase transactions. Right now, the borrower must own the equity in the home before a reverse mortgage can be applied for.

Variations in the Texas Constitution are nothing new. Although reverse mortgages have been around since 1961, they did not become legal in Texas until 1999. Now, the Texas Mortgage Lenders Association will seek a constitutional amendment in the summer of 2011, meaning it may be three years before buyers in Texas are eligible for the program.

While these additional protections are perhaps unsurprising, it is also fair to say that many did not see the hecm for purchase program coming.  And the Texas Constitution was created long before reverse mortgages were.  Ideally, the state of Texas will be able to change their Constitution soon in order to allow elderly borrowers to benefit from the program, especially as the country emerges from its recession. But realistically, the 2012 estimate given in the article is more realistic.

Breaking News: A new HUD Mortgagee Letter was released on Tuesday, HUD Mortgagee Letter 2009-21.  The letter covers the HECM refinancing of existing loans.  Some important points:

- A technical correction to 73 FR 51596 and the 24 Code of Federal Regulations (CFR) Part 206 stating that the FHA will insure all loans that we originated for the purpose of reginancing an assigned loan that is not in a due and payable status for reasons that cannot be corrected, but closed on or after October 6, 1008.

- A mandatory “anti-churning disclosure” requirement as a consumer protection measure for all refinanced HECM.s. The Anti-Churning disclosure form must be signed by the mortgagor and be included in the FHA case binder.  The form, designed to ensure that the HECM refinance will benefit the mortgagor, requires that the mortgagee provide the mortgagor with its best estimate of the total cost of refinancing to the mortgagor and the increase in the mortgagor’s principal limit as measured by the estimated initial principal limit on the HECM refinance less the current principal limit on the existing HECM. The mortgagee must also provide the mortgagor with the best estimate of funds available to the mortgagor minus any closing costs/fees.

- For HECM loans that are closed-end lines of credit, the Anti-Churining Disclosure Form must be issued concurrently with the Good Faith Estimate.  For HECM loans that are open-end lines of credit, it must be issued with the other disclosure forms provided in lieu of a GFE.

- Mortgagors in a HECM refinance can waive/opt-out of counseling if they have received the HECM Anti-Churning Disclosure form, if the increase in the mortgagor’s principal limit exceeds the total cost of the HECM refinance by an amount equal to 5 times the cost of the transaction and if the time between the closing of the existing HECM and the application for refinancing is five years or less.

- The mortgagee letter also contains detailed instructions for servicers regarding how to treat the loan.

The complete HUD Mortgagee Letter 2009-21 can be found here.

Fox Hill outside Bethesda, MD

A new concept for senior housing was profiled in the New York Times today.  The article focused on Fox Hill, a new senior housing complex outside Bethesda, MD.  Rather than only allowing seniors to rent rooms on a monthly payment or requiring them to pay a high entrance fee which is partially refunded when they either pass away or move out, Fox Hill allows seniors to own their homes. Yet they still receive many of the same benefits that come with living in a senior home, including communal meals, social activities, and access to health care. In home care is available at an additional fee, and assisted-living units are also within the same building, enabling couples to live close to one another while one requires more assistance.

Fox Hill, developed by Sunrise Senior Living, has had trouble filling all the condos. However, the concept seems interesting, especially because it appears that, assuming the condos are FHA approved, the HECM for Purchase program might enable borrowers to use a reverse mortgage to purchase their condos.  The article also surmises that the number of seniors in all types of housing has slipped nearly 2 percentage points thus far this year, as seniors struggle to sell their homes. It wonders whether the concept will gain more traction once the market rebounds.

The concept seems valuable, especially when one considers the large numbers of seniors congregating in locations such as South Florida and Phoenix.  There is something to be said for being a part of a community of one’s peers, and many seniors in those areas also own their homes. While the properties in Fox Hill are expensive, ranging from around $500,000 to just over $1 million, there are seniors who are willing to pay that much for a new home.  And while, as the article notes, some seniors do not care whether or not they own their home, others note that they like that they are accumulating equity.