With the principal limit factor decreasing by 10% tomorrow, the number of reverse mortgage case numbers assigned has surged in the last few days. A letter from Peter Bell, President of NRMLA, announced that 60,784 case numbers had been requested in “the last few days.”  That is more than half the number of HECMs endorsed in all of FY 2009.

The good news is that, so far, the system seems to be working. Of the 60,784 case numbers, 58,631 were issued in less than two seconds, and an additional 1,800 were issued in less than 10 seconds. These turnaround times are a good omen for those concerned about the FHA Connection system’s ability to handle the increase in demand. However, with about 12 hours until the deadline, it’s too early to alleviate all concern.

This week’s reverse mortgage rates are below. The rates are effective for the week beginning September 29, 2009.

APR:

HECM LIBOR 225: 2.496

HECM LIBOR 250: 2.746

HECM LIBOR 275: 2.996

HECM LIBOR 300: 3.246

Expected Rates:

HECM LIBOR 225: 5.86

HECM LIBOR 250: 6.11

HECM LIBOR 275: 6.36

HECM LIBOR 300: 6.61

While the HECM LIBOR APR remained constant this week, the expected rate declined slightly. As this is the last week that borrowers will be able to get in under the old Principal Limit Factors (PLF) before the new PLFs go into effect on Thursday, the decline in expected rate is welcome.

Genworth Financial Home Equity Access has announced it is coming out with a fixed rate reverse mortgage product, with a 5.625% interest rate. Genworth is likely to be the last large wholesaler to announce a fixed rate reverse mortgage product, but with a lot of lenders reporting slow turn times with the fixed rate products at wholesalers, this will hopefully help alleviate some of the congestion within the market. The more wholesalers that offer reverse mortgage products, the faster the industry turn times will be.

As the news today that housing resales dropped in August sent stocks spiraling downwards, those within the real estate industry were faced with a really interesting reality. The housing market rebound may not be as linear as once hoped.

Existing home sales fell 2.7% in August after a record increase of 7.2% electrified the industry in July.  However, there are many factors that likely played into the change. The federal tax credit of $8,000 for new home buyers is due to expire soon, likely contributing to the glut of deals in July.  Jobless rates continue to be high, as do foreclosures. With many foreclosures yet to hit the market (likely knocking home prices down), it seems reasonable to think that the market may not climb steadily, but rather peak and valley as it restarts.

This may just mean that government programs and incentives (such as the tax credit) are important to getting consumers back in the market, and that sellers may just need to watch timing to match the ups and downs of the market.  Even when home sales increase, the inventory of houses on the market is still high and unlikely to dissipate rapidly. But sellers can likely work within the curves of the market to best optimize when to sell their home (and at what price).

Finally, the coming winter means that it’s unsurprising that home sales will dwindle.  Home sales generally increase during the spring and summer, with the warmer temperatures.  Sales will probably decrease as fall changes to winter.

HUD just announced today that effective October 1, 2009, the principal limit factor (PLF) on reverse mortgages will be reduced by 10%. The new PLF table can be found at:  http://www.hud.gov/offices/hsg/sfh/hecm/hecmhomelenders.cfm.  This PLF table will go into effect for all loans taken on or after October 1, 2009.

These changes to the principal limit are not a large surprise, given the appropriations bills now going through Congress.  The reverse mortgage program was not designed to be supported by a credit subsidy, and since the appropriations bill is also unlikely to grant a subsidy, program changes are the only way to keep the reverse mortgage program operating in the new fiscal year (which begins October 1, 2009).  Nonetheless, these changes are not likely to be embraced by the reverse mortgage community, as they will prevent some seniors from receiving the amount of money from their homes necessary to be eligible for the program.  A reverse mortgage was designed to help as many seniors as possible. This is likely to reduce their ability to do so.

The mortgagee letter can be found below:

Mortgagee Letter 09-34

The FHA released four new mortgagee letters late last week that will have a significant impact on the way appraisals will be conducted in the future.  Although the mortgagee letters will not go into effect until January 1, 2010, they will cause some of the following significant changes to occur:

- Reduce the amount of time an appraisal remains valid to four months from six months.

- Clarify rules regarding what happens to an appraisal when the borrower changes lenders.

- Reaffirm rules regarding appraiser independence, while adding some new requirements, including the lender’s responsibility for ensuring the correct appraiser is listed in FHA connection, and preventing the lender from using any appraiser who is selected, retained, or compenstated in any manner by the mortgage broker or any member of the lender’s staff who is tied to the loan on a commission basis.

The fourth mortgage letter, while not directly relating to reverse mortgages or appraisals, requires all FHA mortgagees to submit an annual audited financial statement.

Copies of all the letters can be found below. While reducing the amount of time an appraisal is valid to four months from six months could add an expense to borrowers when a loan gets held up in processing, hopefully the change will add some urgency to processing reverse mortgage loans in a timely fashion and will allow borrowers to get a more realistic appraisal in a rapidly changing housing market.

Mortgagee Letter 09-28

Mortgagee Letter 09-29

Mortgagee Letter 09-30

Mortgagee Letter 09-31

Reverse Mortgage Guides is pleased to announce the launch of a new section of the site entitled, “Tools for Lenders.” The Tools for Lenders section includes tools for reverse mortgage lenders and loan officers, as well as for those wishing to enter the reverse mortgage industry.  Some features include:

- a free downloadable reverse mortgage calculator

- a reverse mortgage industry job board

- a link to the industry news section of Reverse Mortgage News

- an article with advice on how to get started in the reverse mortgage industry

We expect the section to continue to grow in the future, and welcome feedback as to what you would like to see in the section. In addition, we have decided to open the section to advertising. If you are interested in advertising within the lender section, contact reva.minkoff (at) reversemortgageguides.org.

A link to the section can be found in the footer of nearly any page on Reverse Mortgage Guides.

This week’s reverse mortgage rates are below. The rates are effective for the week beginning September 22, 2009.

APR:

HECM LIBOR 225: 2.496

HECM LIBOR 250: 2.746

HECM LIBOR 275: 2.996

HECM LIBOR 300: 3.246

Expected Rates:

HECM LIBOR 225: 5.89

HECM LIBOR 250: 6.14

HECM LIBOR 275: 6.39

HECM LIBOR 300: 6.64

The HECM LIBOR rates rose slightly this week for the first time in about a month.  Both the APR and the expected rate went up, though the APR remained nearly the same as the week previously, rising only three one thousandths of a point. The expected rates rose five hundredths of a point.

A column in The New York Times today revealed that nearly 30% of adult children contribute to their parent’s care, on average spending $2,400/year. The expenses can cover everything from unpaid medical expenses to daily chores like stocking a refrigerator.  The time and expense of caring for an aging parent can be a large stress on adult children– financial and emotionally. However, as the article notes, there are many sources that can help reduce the burden.

For some seniors who continue to live in their homes, a reverse mortgage can serve as a possible solution, providing another source of income to help pay for medical bills, adult day care, and the like. Another important point raised in The New York Times column is that there are a number of other resources available to assist seniors and their families, which are often inadvertantly overlooked. The column talks about the services that can be provided by a geriatric care manager, who can help assess a family’s needs and put the family in touch with the appropriate resources.  Lawyers and geriatric care managers can also be a resource to help families navigate the complex red tape and bureacracys that sometimes surround senior programs.

One of the biggest takeaways I gathered from the article is that there are a variety of programs that seniors can qualify for, even if their income is over $100,000.  Another is the importance of planning ahead.  The article discusses, power of attorney, for example. As seniors and their families think about the future, issues like power of attorney, long term care insurance, and wills should be addressed sooner rather than later.

Last night Bank of America announced that it was suspending the origination of its fixed-rate product in Illinois. This occurred because of the Illinois High Risk Home Loan Act (HRHLA), which only applies in the state of Illinois. The act is designed to protect borrowers against high-cost loans, and applies to all kinds of loans and mortgages.  Under the threshold set by HRHLA, Bank of America’s fixed-rate product is high cost, since the total closing costs often exceed 5% of the principal limit.

As a result, Bank of America has suspended all fixed-rate reverse mortgage loans in Illinois effective immediately.  They are not allowing wholesale partners to purchase any more Illinois high cost loans.  Bank of America will work with all business partners regarding Illinois loans with a closing costs:principal limit ratio greater than 5%. If new fixed-rate loan applications are received by Bank of America, Bank of America will work with the business partner to determine if the transaction should be re-disclosed as an adjustable-rate.  Otherwise, the loan will be denied.

Although Bank of America has only been issuing its fixed-rate product for the last month or so, this change is still likely to reverberate throughout Illinois.

Meg Burns

The FHA Director of the Office of Single Family Program Development, Meg Burns, started a commotion at the MBA Conference in San Diego last week when she mentioned that the FHA was looking into making some changes to the reverse mortgage product.  Some of the proposed  changes include introducing new products such as the HECM Mini. While the HECM Mini has yet to be officially released, and there are certainly some kinks and details to be worked out, the gist of the product seems to be as follows:

Right now, the HECM is a one-size-fits-all product.  Borrowers are not able to choose how much of the home’s equity they would like to use or how much income they would like to receive from the home.  The HECM Mini would enable a borrower to borrow against smaller amounts of their home equity to obtain the funds they need at a given period of time. The fees for the loan would be lower, so that it might well serve those with 1-3 years remaining in their home.

While no specific numbers were floated for the FHA’s HECM Mini, I have a feeling it may resemble MetLife’s proposed HECM II in fee structure.  This would mean that there would be no upfront mortgage insurance premium, with the mortgage insurance premium instead being paid/assessed annually. The product would also feature lower LTVs than a traditional HECM. MetLife’s HECM II assumes 3% annual appreciation.

Now obviously the HECM II is not the same as the HECM Mini, but again, since no finite details for the HECM Mini have been announced, the HECM II provides a structure for thinking about what the HECM Mini might look like.

The HECM Mini could vastly benefit seniors, enabling them to choose a smaller principal limit if they would like it.  Right now a reverse mortgage is a longer term product, but the idea of seniors being able to borrow against their home as needed with lower fees is one that will likely be agreeable to many seniors. Let’s hope the HECM Mini comes out soon.

Also, if anyone knows anything more about the proposal, please feel free to comment below.

In June, HUD released new guidelines for condominium approval for reverse mortgages. The guidelines were supposed to go into effect on October 1st. However, HUD has now announced that the new guidelines will only apply to case numbers assigned on or after November 2, 2009.

The mortgagee letter can be found at Mortgagee Letter 09-19ml, in case anyone needs a reminder as to the new HUD guidelines.  The delay in implementation makes one wonder whether, if the new co-op eligibility requirements are ever announced, they will go into effect as scheduled.

As Reverse Mortgage Guides prepares to launch its new section for reverse mortgage lenders, it has decided to open up the Lenders section to advertising. Advertising, which will only be available on the Lenders pages, should therefore be targeted to those within the reverse mortgage industry. Rates are expected to start at $60/month, with discounts available for those advertisers that link to Reverse Mortgage Guides. For more information or to advertise on Reverse Mortgage Guides, please contact Reva Minkoff at reva.minkoff (at) reversemortgageguides.org.

This week’s reverse mortgage rates are below. The rates are effective for the week beginning September 15, 2009.

APR:

HECM LIBOR 225: 2.493

HECM LIBOR 250: 2.743

HECM LIBOR 275: 2.993

HECM LIBOR 300: 3.243

Expected Rates:

HECM LIBOR 225: 5.84

HECM LIBOR 250: 6.09

HECM LIBOR 275: 6.34

HECM LIBOR 300: 6.59

Both the APR and the expected rate for a reverse mortgage remained nearly the same this week. The APR fell .008 points from last week, while the expected rate only fell by one hundredth of a point.

As this week is not a holiday week, rates will return to being effective for a one week duration.

I apologize for the lack of posts over the last few days, but the MBA Reverse Mortgage Conference in San Diego was very time consuming. I hope to make up for it with some interesting tidbits, great pictures, and new guest writers in the weeks to come.  Now for the recap of what I did last week:

Day 1

The conference kicked off with a welcome reception outside at the hotel.  The purple sushi was a highlight (I have never seen purple rice before). So was meeting some of the people at the conference.  The event was a joint event with the MBA’s Document Management and Custody Conference, and it was an added bonus to meet some of its attendees.

Day 2

The conference really began bright and early the next morning. However, those who did wake up on time were treated to a wonderful keynote/state of the industry session.  Meg Burns, Director of the Office of Single Family Program Development for the Federal Housing Administration (FHA), provided a lot of particularly insightful information about the FHA’s plans for the reverse mortgage space this coming year. While many of the things FHA is thinking about have been discussed for some time, it was interesting and valuable to hear a lot of the information straight from the FHA.  Expect postings on the HECM Mini and the T&I Set Aside to come soon.

The rest of the day was filled with some other useful sessions (and a very good lunch) before ending with another networking reception in the exhibit hall. Some highlights included the session on REOs, Foreclosures, and Loss Mitigation, which was moderated very skillfully by Neil Morse. One of the most interactive sessions I’ve attended at a conference so far, even some of the more experienced participants learned new information and had misconceptions corrected. The session on Counseling, featuring the heads of MMI and NHCA, was also quite useful, providing a valuable look into the way two of the leading HECM counseling agencies operate.

Day 3

The final day of the conference featured three general sessions, as the crowd progressively thinned as people rushed to the airport to catch their flights. The legislative and regulatory round-up went through each state’s reverse mortgage legislation, as well as a brief overview of some of the federal legislation of particular importance. To answer the much debated question about when co-ops will become eligible for HECMs, the mortgagee letter is expected in October, with implementation expected to take place around January 1. However, the mortgagee letter is expected to set a record for the most amount of pages in a mortgagee letter– meaning that implementing the co-op eligibility may be to cumbersome to have the desired effect. We’ll have to wait and see.

The session on Reverse Mortgage Fraud was interesting in that it showed how easy identity theft can be. While the biometrics proposed by the speaker, C. Robert Simpson, were very cutting-edge and secure, their cost made me doubt that they would ever be able to be widely applied to the reverse mortgage industry. However, I agreed with his idea that the ability to protect your identity using biometrics could be very valuable.

The conference ended with a session on the state of the secondary market. Much of this information was not new, but it was hopeful to see how much the Ginnie Mae pool has grown in the last few months. However, I did not find the session encouraging to those who wanted to get into the reverse mortgage wholesale market.

With the sessions ended and the booths packed up, those who remained headed to catch their flights (or head back to the office).

As a parting note, some pictures from the conference:

Driving downtown from the San Diego airport

The gigantic king-size bed at the hotel

Downtown San Diego as seen from my flight home.

I had a great time at the conference. I can’t wait to go back!  With the MBA Annual Conference in San Diego in mid October and the NRMLA Annual Conference also in San Diego in mid November, there’s no better excuse for a trip.

Hello from San Diego! The MBA Reverse Mortgage Conference is under way. Live tweets can be found at www.twitter.com/hecmgirl. The conference has been incredibly interesting so far, featuring a wide variety of participants. This morning’s highlights included previews of new FHA programs and protocols (more to come on this later) and a very interesting exchange regarding reverse mortgage defaults.

The number 1 reason a reverse mortgage “defaults” is the death of the last borrower on the reverse mortgage loan, but default in this context means the loan becomes due and payable (in accordance with the loan contract). However, another large issue regarding defaults are defaults due to the failure to pay title and insurance. While servicers will do so in order to keep the asset (the home), the loan will become due by the borrower if they don’t pay title and insurance. This is an area where many in the industry see potential for improvement.

I wish I had time to write more, but the afternoon sessions are about to begin. More to come later!

This week’s reverse mortgage rates are below. The rates are effective for the week beginning September 9, 2009. As the HECM CMT is no longer being offered, we will no longer report its rates.

APR:

HECM LIBOR 225: 2.501

HECM LIBOR 250: 2.751

HECM LIBOR 275: 3.001

HECM LIBOR 300: 3.251

Expected Rates:

HECM LIBOR 225: 5.85

HECM LIBOR 250: 6.10

HECM LIBOR 275: 6.35

HECM LIBOR 300: 6.60

The rates for the HECM Libor fell over a tenth of a point this week, a nice development after two weeks of nearly unchanged results. This week’s rates are only good through September 14, 2009.

In a piece in the New York Times today, Edward Glaeser, the famed Harvard economist, made the following comment:

“When housing prices soared, ordinary Americans found it increasingly hard to afford a house. I would certainly cheer if Detroit produced a wonder car for $10,000 that could get 50 miles to the gallon and go from 0 to 60 in five seconds. I would also cheer if the housing industry could produce a beautiful and energy efficient 3,000-square-foot home for $100,000. The same logic pushed me to boo when housing became outrageously expensive. During the boom, I hoped that housing prices would stop rising and even decline.”

Glaeser’s sentiment leads to the following reflection: Isn’t there something appealing about a big beautiful home for $100,000? If housing is a basic right of all Americans (let alone all human beings), then wouldn’t it follow that low housing prices would be a good thing?

Imagine a world in with housing prices were so low that individuals purchasing their homes with cash was commonplace. While mortgages would still exist, they would no longer be necessary for all homebuyers. Perhaps a mortgage would become an option, like the decision purchasers make every day when deciding to make a purchase with cash, credit, or debit. Or, arguably more accurately, like the decision car buyers make when choosing whether to take out a loan or pay with cash.

It is true, as Glaeser pointed out, that low housing prices do have a more dramatic effect on the financial markets than most expected. However, this is only due to the symbiosis that exists between the housing industry, the mortgage industry, and the home goods industry.  So many of the problems in the housing crisis were caused by homes being used as an investment vehicle. When home prices fell, borrowers were stuck with homes that were worth much less than their mortgage payments.  As more and more borrowers lost their jobs in the subsequent Great Recession, even many whose homes still retained equity found themselves unable to afford their mortgages.  And the housing crisis was exacerbated.

The idea of affordable housing for all is a very appealing one.  While it does seem hard to imagine a world in which affordable housing for all could be made a reality and where housing prices could fall so as to make homeownership affordable without crashing the economy, before we spend all our time wishing housing prices would go back up, we should consider solutions (esp. long term) where housing does become more affordable, home ownership more stable, and an individual’s right to housing less susceptible to the whims of the economy.

For the rest of the week, Reverse Mortgage Guides will be in San Diego at the Mortgage Banker Association’s Reverse Mortgage Conference.  Follow us on Twitter at www.twitter.com/hecmgirl for tweets from the conference, and hopefully we will be able to treat you to a few interviews next week.

I look forward to seeing some of you in California!

The media has recently been full of stories about homeowners losing their homes to foreclosure, but there is a side that has received relatively less exposure: the effects foreclosure has had on many pets.

While a story in the Chicago Tribune several months ago discussed a pet food pantry that was helping homeowners who could no longer afford to look after their pets, a sadder tale is emerging in Arizona.  As the two co-owners of Robin Hood Animal Rescue face foreclosure, 70 cats and dogs are at risk of being euthanized. Some of the animals have special needs (as is the case in most animal shelters), and the shelter has housed some of the animals for four or five years.

There is a lot of irony in an animal rescue shelter needing rescuing itself, but after so many years of speaking out against euthanizing unwanted animals, the shelter is now the one in need of rescuing. The heartbreaking story can be found at abc15.com. Those wishing to help can also visit Robin Hood Animal Rescue’s website.

An article in the Wall Street Journal today focused on a noteworthy new phenomenon: more homeowners are taking in renters.  In some cases, homeowners are taking in renters in homes they still live in as a way to help make ends meet. In others, homeowners are becoming landlords, renting out homes they are unable to sell. This seems to be a popular option when the homeowners are forced to make a quick move- especially in the distressed real estate market. While to qualify for a reverse mortgage, a single family residence cannot be a rental property, nor can any portion of it be a rental property, renting out a home may be a good option for those who do not qualify for a reverse mortgage, but need the income from their home.  In addition, multi-family homes with separate apartments may be rented and still qualify for a reverse mortgage as long as the homeowner continues to occupy the home.

There are some additional costs that come with being a landlord.  Landlord insurance is about 25% higher than homeowners insurance, and landlords who use property manages may wind up paying them 3-12% of the rent.  However, a tenant can be a good source of income, helping homeowners be able to continue to afford mortgage payments or break even on a property.  When homeowners need to relocate in a short time frame, taking on a tenant helps alleviate the financial burden of paying for two mortgages at once (or a mortgage and rent).

The FHA released a final rule today that made the new HECM counseling standards official. The rule goes into effect on October 2, 2009.

Among the new standards, the rule establishes standards for certification testing for HECM counselors and a national Roster of HECM counselors. The final rule establishes that:

1. HECM counselors who have passed the exam by October 2, 2009 will be automatically included in the HECM counselors Roster.

2. HECM counselors who have been removed for the Roster may apply for reinstatement by explaining in writing how the deficiencies that were the cause of their removal have been addressed and how their program has been improved so as to warrant reinstatement of the counselor.

3. To be eligible for the HECM counselor Roster, counselors must not be listed on any of the following lists: General Services Administration’s Suspension and Debarment List, HUD’s Limited Denial of Participation List, or HUD’s Credit Alert Interactive Response System.

4. Counselors have a 30 day period to submit a written appeal of their proposed removal from the Roster.

5. A counselor may be removed for a maximum period of one year.

Counselors will be tested every 3 years to remain on the Roster and must complete continuing education requirements.

The final ruling can be read in its entirety as it appears in the Federal Register. Hopefully the ruling will help improve the HECM counseling process.

UPDATE: The FHA HECM counseling protocols have yet to be released. An update will go out when it is published.  The Final Rule published today only covers the HECM counseling Roster and the standards that accompany it.

Pending home sales improved for the sixth straight month in July to a level of 97.6 on the National Association of Realtors (NAR) index. While the index has improved dramatically from January, when it was around 80, levels still are nowhere near what they were during the housing bubble.  In 2005, the pending home sales index neared 130.

Although pending home sales have increased, some of the factors behind the increase include falling home prices, low mortgage rates and the Obama administration’s $8,000 tax credit for first-time home buyers. But with the tax credit expiring towards the end of the year and home prices beginning to go back up (or decrease less rapidly), some question whether the rise in pending home sales will be sustainable.

(Reference: The Wall Street Journal print edition)

An article on Forbes revealed today that even within the Forbes list of America’s 500 Most Expensive Zip Codes, home prices have taken a large hit in the past year. The top 3 zip codes on the list experienced declines of 23%, 23% and 24% respectively. The list as a whole saw a 7% drop on average.

But one of the things that is interesting about the list is that prices were not necessarily being pulled down by foreclosures.  Several zip codes (in Atherton, CA, Hastings-on-Hudson, NY and East Hampton, NY) were used as examples of places where prices have dropped significantly without homes being in foreclosure. No homes are in foreclosure in Hastings-on-Hudson, yet prices have dropped 9%.  In Atherton, only 10 homes are in foreclosure with prices dropping 23%. Rather, it appears the glut of homes on the market has helped to drive prices down. In East Hampton, at the current rate, it would take 25 years before all the homes currently on the market are sold. This cannot help but have an affect on home prices.

The five most expensive zip codes in America:

1. Alpine, NJ  ($4,139,041)

2. Atherton, CA ($3,849,133)

3. New York, NY ($3,521,514)

4. Duarte, CA ($3,444,773)

5. Beverly Hills, CA ($3,367,167)