HOUSINGNEWS REPORT
REVERSE MORTGAGES: CAN FINANCING FOR SENIORS CHANGE WITH THE TIMES?
But another approach looks like this. Cut lender fees and HECM originations will decline, along with the risk they represent. Writing on LinkedIn, and as first reported by HousingWire, Stevens said that “Brian Montgomery is trying to fix the abuse, but the product is the one that kept me awake at night when I was there — outrageous profits, predatory sales approach, and full-draw HECMs only fuel the fire.” “Seniors,” added Stevens, “do not need aggressive salespeople using former actors and presidential candidates as pitchmen.” A Private Response Has HUD made the HECM program too restrictive? If yes, might the private
sector be interested in pursuing the reverse mortgage marketplace? Already, according to the National Reverse Mortgage Lenders Association, four lenders offer private reverse mortgage products: Finance of America Reverse, Reverse Mortgage Funding LLC, Longbridge Financial, and One Reverse Mortgage. What makes private reverse mortgage products interesting is that they do not have to be HECM duplicates. Minimum ages, as well as maximum loan amounts and percentages, can differ from the federal program. More options give seniors more alternatives to consider and that’s good for the marketplace.
not lend against, as well as additional flexibility not provided by the HECM,” said Reverse Market Insight’s John K. Lunde. He added that private lenders might offer second lien position products and reverse mortgages with less restrictive home purchase contract terms. “I think there is a tremendous opportunity in the marketplace for private reverse mortgages that target consumers with high home values,” said Mike Roberts with MyHECM.com. “There are a few so-called ‘jumbo’ reverse mortgages available right now, but the rates are typically high and proceeds have to be taken as a lump sum at closing. Many consumers don’t want or need that much money at closing. It doesn’t make sense to them to accrue interest at a relatively high rate on money they don’t need. I think there is a big opening in the marketplace for a private product that offers more money, competitive rates, lower fees, and a line of credit option.” Will Tax Reform Create New HECM Demand? Reverse mortgage dollars can be used for any purpose. Borrowers might want to take bulk sums and fix up their homes, pay medical bills, or help finance a business. But arguably one of the best uses for HECM dollars is simply to pay off an existing mortgage. The elimination of forward mortgage debt can be a substantial benefit for households where monthly cash flow is an ongoing worry. The case for paying off existing mortgages — and the argument for reverse financing — has been greatly
“Non-FHA reverse mortgages can offer loans on property types that FHA will
“Non-FHA reverse mortgages can offer loans on property types that FHA will not lend against, as well as additional flexibility not provided by the HECM.” JOHN K. LUNDE FOUNDER AND PRESIDENT REVERSE MARKET INSIGHT
FHA REVERSE MORTGAGE PORTFOLIO BY ENDORSEMENT YEAR
MAXIMUM CLAIM AMOUNT ($ BILLIONS)
CURRENT PRINCIPAL BALANCE LIMIT ($ BILLIONS)
INSURANCE-IN-FORCE ($ BILLIONS)
18.0 16.0 14.0 12.0 10.0
8.0 6.0 4.0 2.0 0.0
2009 2010 2011 2012 2013
2014
2015
2016
2017 2018
SOURCE: U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
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DEC 2018 | ATTOM DATA SOLUTIONS
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