This week’s reverse mortgage rates are below. These rates are effective for the week beginning November 10, 2009.

APR:

HECM LIBOR 225: 2.492

HECM LIBOR 250: 2.742

HECM LIBOR 275: 2.992

HECM LIBOR 300: 3.242

Expected Rates:

HECM LIBOR 225: 5.90

HECM LIBOR 250: 6.15

HECM LIBOR 275: 6.40

HECM LIBOR 300: 6.65

The HECM LIBOR APR remained almost unchanged for the seventh consecutive week. This week, the expected rates remained nearly unchanged as well, with a one hundredth of a point decline. It is interesting to see the HECM LIBOR APR remain constant for so long, a phenomenon that has not occurred since  August 2008.

Fannie Mae announced a plan on Thursday that will allow borrowers facing foreclosure to lease their homes. The program, called Deed for Lease or D4L for short, allows borrowers facing foreclosure to hand their deed to the lender in exchange for paying the market rate rent on the home for at least 12 months.

To qualify for the program, borrowers have to have mortgages insured by Fannie Mae, be unable to qualify for President Obama’s mortgage modification program, and be unsuccessful renegotiating with their lenders. While eligible borrowers would have to voluntarily give up the deeds to their homes, they would be able to stay for at least a year, providing that they paid the market rate rent. Rents would then be renewable on a month-to-month basis. Eligible borrowers must document that the new market rate rent is no greater than 31% of their gross income to qualify for Deed for Lease.

The Deed for Lease program is an extremely interesting and valuable way to keep delinquent borrowers in their homes, or merely to allow time for a transition. The program may be especially valuable for families with children, whom they do not want to remove from their schools in the middle of the year. It will help give families more time to come up with options. It will also help underwater homeowners– especially in areas that have seen property values drop significantly.

Furthermore, since tenants of qualifying borrowers are also eligible for the program, Deed for Lease will help tenants whose landlords face foreclosure. As a result, it appears that, though Fannie Mae provided no estimates for how many borrowers will be eligible for the program, Deed Lease looks to be a promising alternative to severely delinquent borrowers with Fannie Mae loans facing foreclosure–and for their tenants.

More information about the program can be found at www.efanniemae.com.

The US House of Representatives

The new homebuyer’s tax credit extension that we have discussed extensively in the past week was passed by the House of Representatives today. Now that the bill has been passed by Congress, it will go to President Obama for his signature.  The bill passed by a vote of 403-12 after it unanimously passed in the Senate. The bill is expected to be signed into law by the President tomorrow.

For more posts on this topic, please see:

Breaking News: Deal Announced to Extend New Homebuyer’s Tax Credit Through April 2010

Reflecting on the Impact of an Extended Tax Credit

With the 2009 fiscal year ending on September 30, this month’s HECM volume report revealed a new list of the top 10 reverse mortgage lenders, very much changed from that of last fiscal year.  The list is below, compared to that of 2009 FY. However, given how close many of the lenders are to each other in terms of the number of HECMs they endorsed, it is by no means clear how the list will shake out over the next few months.

October 2009:

1. Wells Fargo

2. Bank of America

3. MetLife Bank

4. Financial Freedom Acquisition

5. One Reverse Mortgage

6. 1st AAA Reverse Mortgage

7. First Mariner Bank

8. Security One Lending

9. Harvard Home Mortgage

10. Stay in Home Mortgage

Fiscal Year 2009:

1. Wells Fargo

2. Bank of America

3. World Alliance Financial Corp

4. Financial Freedom

5. One Reverse Mortgage

6. MetLife Bank

7. Countrywide Financial

8. Generation Mortgage

9. Urban Financial Group

10. 1st AAA Reverse Mortgage

Thus, from last year’s top 10, only 6 remain in the top 10 for October. The complete list for October can be found on the HUD website. The changes will also be reflected on the Reverse Mortgage Guides website in the Lender Directory in the near future.

We knew that reverse mortgage applications were likely to jump to new levels in September, but we did not know how much- until now. September’s FHA Outlook report shows a 72.4% increase in HECM applications in September versus August.  19,055 HECM applications were submitted in September, versus 11,051 in August.

Therefore, while only 9,473 reverse mortgages were endorsed by the FHA in September, up from 8,933 in August, the number appears poised to climb in October and November, as those who applied before the principle limit factors fell 10% on October 1st complete their applications. It is also interesting to note that the number of purchases and refinances made up a very small percentage of the reverse mortgages endorsed, with 137 HECMs for Purchase and 790 HECM Refinances endorsed in September.

Finally, as the fiscal year ended, it is good to see that the FHA’s predictions were fairly in line with the actual results.  162,619 HECM applications were filed, as opposed to the 165,000 projected in FY 2009. Of those, 114,691 HECMs were endorsed in FY 2009. This is an increase of 2.3% from last year, though still below the projected 119,700 endorsements. Nonetheless, it appears that the reverse mortgage industry grew in FY 2009, despite the recession, and appears poised for a strong beginning to FY 2010.

This week’s reverse mortgage rates are below. These rates are effective for the week beginning November 3, 2009.

APR:

HECM LIBOR 225: 2.494

HECM LIBOR 250: 2.744

HECM LIBOR 275: 2.994

HECM LIBOR 300: 3.244

Expected Rates:

HECM LIBOR 225: 5.91

HECM LIBOR 250: 6.16

HECM LIBOR 275: 6.41

HECM LIBOR 300: 6.66

The HECM LIBOR APR remained almost unchanged for the sixth consecutive week. However, the expected rates continued to rise. This week saw a dramatic increase by .08 for the borrowers.  It will be interesting to see when the APR finally changes, and, when it does, whether the expected rates will adjust is the same direction.

Last week a bi-partisan deal was announced in the Senate that will likely pave the way for the new homebuyer’s tax credit to be extended through April 2010.  The deal also includes plans for a significant expansion of the tax credit, raising the income requirements to $125,000 per individual and $225,000 per couple from $75,000 per individual and $150,000 per couple. This expansion means that many more individuals will be eligible for the tax credit than were previously. Finally, the deal added a $6,500 tax credit will be available to homeowners wishing to move out of their current home into a more expensive one.

I have been thinking about the deal all weekend, and I worry about its effects. While the goal of the credit is to strengthen the market and help bring home prices back up, increasing income requirements and adding a tax credit to incentivize trading up seems like it risks exacerbating the current problems in the housing market.  Many of the current problems in the housing market have been created by homeowners (many first-time homeowners) taking out mortgages that were more than they could afford to pay in order to buy homes. Even when they could afford the mortgage, the recent economic problems have led many to be out of work or find their401(k)s and pensions to be less than they had expected. Consequently, the number of foreclosures and mortgage delinquencies reached all time highs in recent months.

In light of these developments, some proposed that maybe homeownership should no longer be an essential part of the American Dream.  It was argued that it is a disservice to put people into homes they cannot afford. While the tax credit is not a very large sum of money, it is enough money to push individuals to act in uncertain times.  A realtor in Portland, ME commented that nearly 70% of their clients were motivated by the tax credit. Yes, the housing market could use a boost, but when individuals are making a significant long-term financial decision for a short-term financial incentive, it seems like many poor choices can occur.

Reverse mortgages and refinances are available to help homeowners who find themselves over-extended, but reverse mortgages are only available to those over 62, and refinances and short pays have been extremely hard to get.  To avoid another housing crisis, the government does need to stimulate the market, but putting more borrowers into homes they cannot afford does not seem to be a safe way to do so.