Scott Tucker's Reverse Mortgage Marketing Blog

"HECM Program Not Subsidizing the Rest of FHA Say Analysts..."

New View Advisors published an interesting analysis on the risk profile of the Federal Housing Administration’s reverse mortgage program (HECM).

Using an actuarial analysis published by IBM in October 2009 and FHA’s Annual Management Report (AMR) for FY 2009, New View anticipates that we can expect a tightening of ending standards across FHA’s entire program, both forward and reverse.

For years there has been a group of people who believe that due to the frontloaded MIP structure of the HECM program, the cash generated has been used to subsidize other parts of FHA’s business. 

However, New View writes that the dramatic increase in the HECM Loan Liability Guarantee (LLG) which is used to estimate the present value of projected income and costs make it clear that the HECM program is not subsidizing the rest of FHA.

According to the AMR, the LLG rose alarmingly from $19.3 billion in FY 2008 to $33.9 billion in FY 2009, up 75%.

HECM accounted for $4.4 billion of this increase, not an insignificant amount. Overall, HECM LLG nearly quadrupled, from $1.5 to $5.9 billion.

This amount represents, in effect, the negative net present value of the HECM program, and exceeds the total amount of MIP ever collected. Most of this is concentrated in the GI fund, not the MMI fund.

The AMR attributes says this “increase in liability is primarily due to the drop in house price appreciation projections … [which] results in lower recoveries from future HECM assigned assets which increase the liability.”

True, but the reversal of fortune for the LLG surely also reflects the house price depreciation that began in 2007 and continued through FY 2009.

Therefore, given the uncertain state of the housing market, and its diminished capital position, FHA was justified in reducing the HECM principal limits says New View.

"Top 10 Reverse Mortgage Myths..."

Recent headlines pointing to the detriments of reverse mortgages aren't getting the story straight. 

One of the nation's leading reverse mortgage lenders, Generation Mortgage Company™, wants to separate fact from fiction.

"Because so many Americans over the age of 62 are facing significant financial stress due to dropping retirement and savings account balances, as well as higher healthcare costs, many groups are targeting seniors under the guise of helping them," said Scott Peters, CEO and President of Generation Mortgage. 

"HECM reverse mortgages are Federal Housing Administration-insured products and are heavily scrutinized by regulators and legislators looking to protect seniors' best interests. 

As a result, more than 600,000 American seniors have obtained reverse mortgages that have enriched their lives by allowing them to stay in their homes and pay off their bills."

According to Generation Mortgage, the most common reverse mortgage myths are:

Myth: If I take out a reverse mortgage the lender will own my home.

Fact: False.  Homeowners still retain title and ownership to their homes during the life of the loan, and can choose to sell the home at any time. As long as the house is maintained and property taxes and homeowners insurance are paid, the loan cannot be called due.

Myth: My children will be responsible for the repayment of the loan.

Fact: False.  Reverse mortgages are non-recourse loans.  That means, if the property is sold to pay-off the loan when the homeowner passes away or decides to leave the home for other reasons, there will be no mortgage debt for the family and heirs to repay. The maximum amount owed is the current market value of the house.  If the homeowner's heirs want to keep the home, they would pay the balance in-full to the reverse mortgage lender.

Myth: I cannot get a reverse mortgage if I have an existing mortgage.

Fact: False.  With enough equity, you may be able to pay off your existing mortgage or other debt with the reverse mortgage. The reverse mortgage must be in a first lien position, so any existing mortgage must be paid off.  Seniors who take out reverse mortgages are free to do anything they want with their reverse mortgage proceeds. Paying off an existing mortgage is the number one reason most of our clients take out a reverse mortgage.

Myth: Only low-income seniors get reverse mortgages.

Fact: False.  Although some seniors may have a greater need than others for the monthly proceeds or lump sum funds reverse mortgages offer, most simply prefer to be free of monthly mortgage payments.  Without monthly mortgage payments, many homeowners find they can maintain their existing quality of life and build their savings to help with future expenses. A growing number of people who have no immediate need are taking out these loans so that they have a financial cushion for future expenses.

Myth: If I outlive my life expectancy, the lender will evict me.

Fact: False.  Reverse mortgage lenders put no time limit on how long seniors can stay in their homes.  Since homeowners still own the property, lenders cannot evict them, provided they follow the program guidelines. 

Myth:  Reverse mortgage lenders pressure seniors to buy additional financial products.

Fact:  Generation Mortgage offers only reverse mortgage products; it does not sell seniors any other financial products.  Not every reverse mortgage lender operates that way. In fact, Generation has a policy to safeguard seniors from buying unsuitable financial products with reverse mortgage proceeds.

Myth:  There are no objective advisors available to seniors trying to decide if a reverse mortgage suits their needs.

Fact:  False.  Borrowers are required to work with independent, third party counselors approved by the U.S. Department of Housing and Urban Development (HUD) in their local communities. This educational session helps them make the right decision for their unique situations.

Myth: There are restrictions on how reverse mortgage proceeds may be used.

Fact: False.  There are no restrictions. The cash proceeds from the reverse mortgage can be used for virtually any purpose and borrowers should be cautious of lenders attempting to cross sell other products.  Many seniors have used reverse mortgages to pay off debt, help their kids, make ends meet or to have a financial reserve.

Myth:  Reverse mortgage lenders take advantage of seniors.

Fact:  False.  Seniors who have been victims of reverse mortgage lending schemes are extreme exceptions and typically victims of unsavory lenders.  As a consumer, you should only work with lenders who are Better Business Bureau and National Reverse Mortgage Lenders Association (NRMLA) members and adhere to those organizations' strict Code of Ethics and Standards for Trust.

Myth: I've heard I won't qualify for a reverse mortgage because of my limited income.

Fact: Unlike a traditional mortgage where mortgage payments must be made each month, a reverse mortgage pays you.  Because of this, many seniors who do not qualify for traditional financing are eligible for a reverse mortgage.

"FINRA goes after member for reverse mortgage promotion..."

The Financial Insurance Regulatory Agency (FINRA) ordered Virginia Beach, Virginia member avid Allen Abbott to pay $20,000 for promoting the sale of reverse mortgages, and for soliciting various types of investments, from senior citizens.

According to FINRA, Allen's firm prohibits engaging in any reverse mortgage business, including the promotion and sale of reverse mortgages. 

FINRA found that Abbott used communications in the seminars without a registered firm principal's prior written and dated approval, and failed to file slides used in his presentation with FINRA's Advertising Regulation Department.

FINRA also found that Abbott's seminar invitation failed to disclose the broker-dealer's name.

Based on its findings, FINRA has barred David Allen Abbott from associating with any FINRA members for 60 days.

Sincerely, your friend,

Scott Tucker

P.S.: Please go here right now to get my free, updated audio CD interview on reverse mortgages with Shannon Hicks.

"Using appraisal management companies to ensure appraiser independence..." [reverse mortgage]

Earlier this year FHA announced that it would adopt language from the Home Valuation Code of Conduct (HVCC) to ensure full alignment with the Government Sponsored Enterprise (GSE) standards.

FHA is not requiring the use of an Appraisal Management Company (AMC), or other third party providers, but it does require that reverse mortgage lenders take responsibility to ensure appraiser independence.

With a proposed rule putting the responsibility of correspondents on FHA mortgagees (lenders), wholesalers such as MetLife are requiring that brokers use AMCs to ensure they remain compliant.

A notice MetLife sent to brokers...

"Effective on all loans with case numbers assigned on or after December 18th, 2009, the appraisal orders must be placed with an Appraisal Management Company (AMC) to ensure that the appraisal reports are prepared by an FHA Roster appraiser who has not been selected, retained or compensated in any manner by the mortgage broker or any member of the lender's staff who is compensated on a commission basis tied to the successful completion of a loan."

The company is requiring that appraisals be ordered through ServiceLink, Equifax, or National Real Estate Information Services. 

MetLife isn't the only wholesalers who's requiring that brokers use an AMC.

Other wholesalers, such as Live Well Financial, will also be utilizing AMCs to ensure compliance with FHA guidelines. 

In an email to RMD, Brett Ludden, Senior VP at Live Well Financial, said the appraisal ordering process will be integrated directly into its proprietary origination system to make the process easy for correspondents. 

Even if wholesalers can make the new process easy, many reverse mortgage brokers are concerned that the AMC requirement will increase the costs of an appraisal for their customers. 

"The costs on AMC-managed appraisals for conventional-forward mortgages has gone from $225 to a minimum of $405 up to $680," said Jack Belles, President of Reverse Mortgage of New England. 

The company does a few "forward" mortgage loans, and said he sees no reason why the costs won't go up when wholesale reverse mortgage lenders start requiring the use of AMCs.

Sincerely, your friend,

Scott Tucker

P.S.: Please go here right now to get my free, updated audio CD interview on reverse mortgages
with Shannon Hicks.

"NCOA is expanding HECM (reverse mortgage) counseling..."

The National Council on Aging (NCOA) has promoted Barbara Stucki, PhD, to the position of VP, Home Equity Initiatives.
 
Stucki previously served as director, Reverse Mortgage Counseling Network, and Home Equity Initiatives.

"Barb's extensive research and leadership in the home equity field has positioned NCOA as a leading advocate for older adults who are leveraging their home equity to remain independent," says Jim Firman, president and CEO of NCOA. 

"Her knowledge and passion has elevated the issue of reverse mortgages on the national stage, and allowed NCOA to fund new research and services for older adult homeowners."

In her new role, Dr. Stucki will oversee the expansion of NCOA's Reverse Mortgage Counseling Network, which she developed from a pilot program. 

The network is a rapidly growing national housing counseling intermediary funded by HUD.

Prior to her work at NCOA, Dr. Stucki was a senior policy analyst for the American Council of Life Insurers. 

She also worked for 6 years at AARP as a consumer issues policy analyst. 

Sincerely, your friend,

Scott Tucker

P.S.: Please go here right now to get my free, updated audio CD interview on reverse mortgages with Shannon Hicks.

"The Consumer Financial Protection Agency would regulate reverse mortgages..."

HR 4173 passed in the U.S. House of Representatives on December 11th by a vote of 223-202. 

The Reverse Mortgage Amendment proposed by Rep. Jan Schakowsky (D-IL), and Rep. Dina Titus (D-NV), was included.

Their amendment passed by a vote of 277-149, with bi-partisan support.

Rep. Schakowsky released a press release saying...

"We have an obligation to protect our seniors from malicious fraud & prosecute anyone who means to do them harm... Many seniors are turning to reverse mortgages and they need to feel safe and secure in their decision. We must do everything in our power to ensure the fidelity of the system and shield our parents and grandparents from being cheated or misled."

HR 4173 provides for the creation of the Consumer Financial Protection Agency (CFPA), and would give the CFPA authority to regulate reverse mortgages.

To become law, the bill still must pass the Senate and be signed by the President.

Your friend,

Scott Tucker

P.S.: Please go here right now to get my free, updated audio CD interview on reverse mortgages with Shannon Hicks.

"HUD: New condo guide's for FHA-insured reverse mortgages..."

HUD has issued new condo guidelines effective December 7th, 2009. 

However, HUD's making several temporary exceptions to the new rules due to "volatility" in the condo market.

The new FHA policies included in ML 2009-46B cap the number of condo units in a building that can be financed with FHA insured loans at 30%. 

And 50% of units must be owner-occupied to be eligible for FHA financing.

However, ML 2009-46A allows exceptions to the FHA concentration & owner-occ. requirements until December 31st, 2010.

It's as simple as "government healthcare." :o)

HUD's also extending “spot loan approvals,” due to concerns about the condo market, and the new effective date for the elimination of the spot condo approvals is for all FHA case number assignments on or after February 1st, 2010.

Clear as mud?

Reverse mortgage lenders have voiced concern over the risk involved with their Direct Endorsement underwriters authorizing a condo without proper guidance from HUD, so hopefully the new Mortgagee Letter will help alleviate those concerns.

According to ML 2009-46B, lenders will have 2 condo project approval processing options.

The applicable documentation requirements will be the same for each option:

1. HUD Review & Approval Process (HRAP).

2. Direct Endorsement Lender Review & Approval Process (DELRAP). This option is only available to lenders who have unconditional Direct Endorsement authority and staff with knowledge and expertise in reviewing and approving condo projects.

Under DELRAP, lenders must provide the condo approval or denial documents to FHA within 5 business days of final disposition.

These documents must be uploaded using .pdf format through FHA Connection.

Sincerely, your friend,

Scott Tucker

P.S.: To get a free CD on reverse mortgages, please go here right now.

"'Parade' magazine gets it wrong on reverse mortgages!"

Do you ever read Parade magazine? I do sometimes.

I read it mostly because it comes with the Chicago Tribune on Sundays, and because its readers are mostly over 55 or so.

Also, it has a lot of great direct response marketing ads inside.

Like the Jitterbug phone. You gotta love that ad.

Independent auditors say that Parade is read by more than 72 million Americans, half of whom are over 55.

Got your attention now?

A recent story in Parade, called Beware of Reverse Mortgages, ran with a photograph of
a clearly dismayed senior couple, reading what appears to be a worrisome letter.

The Parade article refers to "a host of unscrupulous loan officers, mortgage companies and loan counselors defrauding desperate Americans."

You & I have to fight-back at lazy journalists such as these. These folks are writing articles that are scaring our seniors silly.

Most the folks I've helped with a reverse mortgage have had to get over the fears these kinds of negative articles create.

Some never do.

This is a government-regulated program. If it wasn’t acceptable, the federal government wouldn’t insure it.

Here's the complete article from Parade.

I ask that you go there right now and let them know how far off-base they are.

Hopefully, some seniors will read your comments online. Or at least maybe their kids will.

Sincerely, your friend,

Scott Tucker

P.S.: To get a free CD on reverse mortgages, please go here right now.

"Reverse mortgage lender gobbled-up by bank?"

AAXA has announced that it has entered into an agreement with First National Bank Of Kinmundy (FHNBK), a federally-chartered national bank, with roughly $31 million of assets according to the OCC.

AAXA becomes a direct subsidiary of FHNBK, and will expand its mortgage lending operations, which includes reverse mortgages into all 50 states.

"It's an honor to align with a conservative, 108 year-old national bank, and this alliance will open possibilities for success that would not otherwise be available in the current regulatoryenvironment under the existing multi-state mortgage broker platform," said Greg Gianoplus, AAXA's CEO.

Becoming a subsidiary of a federally-chartered bank requires the bank to own a controlling-interest in AAXA, as the regulatory environment continues to favor non-brokers, many reverse mortgage companies are looking at joining-up with banks.

AAXA’s reverse mortgage operation has been small over the last year, but recently ramped-up, and has 18 reverse mortgage originators, said John Smaldone, Senior VP and head of AAXA's reverse mortgage division.

AAXA has endorsed only 12 reverse mortgages in FY 2009 according to HUD data, but AAXA told Reverse Mortgage Daily that they have in excess of 75 reverse mortgages in their pipeline. 

To get a free CD on reverse mortgages, please go here right now.

Sincerely, your friend,

Scott Tucker

P.S.: To get a free CD on reverse mortgages, please go here right now.

"HUD's IG audit says reverse mortgage underwriting is 'adequate'..."

HUD’s Inspector General says HUD’s oversight of FHA-insured reverse mortgages is generally adequate with the exception of 4 reverse mortgage loans reviewed.

One deficiency found that the reverse mortgage lender used the wrong interest rate when determining the initial principal limit for the reverse mortgage.

The reverse mortgage lender used the interest rate in from an expired lock-in agreement, instead of determining whether there should have been any adjustments to the interest rate.

The error resulted in the lender using the incorrect interest rate of 6.09%, rather than the 6.661% interest rate that was in effect at the time of the closing.

Using the wrong interest rate added $11,742.00 to the borrower’s net principal limit.

Other items found included reverse mortgages whose lenders included fees in the borrowers' closing costs that were not reasonable or customary. 

Borrowers were charged $75 for negative endorsement and $250 for reverse mortgage endorsement fees.

To get a free CD on reverse mortgages, please go here right now.

Sincerely, your friend,

Scott Tucker

P.S.: To get a free CD on reverse mortgages, please go here right now.