Housing-News-Report-December-2018

HOUSINGNEWS REPORT

REVERSE MORTGAGES: CAN FINANCING FOR SENIORS CHANGE WITH THE TIMES?

REVERSE MORTGAGE ENDORSEMENT ACTIVITY

available for new borrowers,” Reverse Market Insight’s Lunde

HECM MORTGAGES ENDORSED

MAXIMUM CLAIM AMOUNT ($ BILLIONS)

explained. However, he also points out that “to the extent interest rates fall it would reduce costs for existing loans and potentially make higher principal limits available to borrowers on new loans.” What Will Happen Next? With changing tax policies and a growing senior population, there’s no doubt that a significant interest in reverse mortgage financing exists. The catch is that such mortgages cannot be available at any price, no more than auto manufacturers can afford to take a loss on every car they produce. “Commissioner Montgomery knows the challenges he inherited here,” David H. Stevens told us, “but these same issues troubled me when I was commissioner. Resistance from special interest groups needs to be overlooked in favor of fixing this program in a way that will protect its long term survival. Some recent changes will help, but much more needs to be done.” In the face of the congressional mandate to maintain a 2 percent MMIF capital ratio, HUD cannot allow HECMs to undermine the far larger FHA forward program. The big question is whether current HECM trends will be enough to eliminate the need for additional program changes. Six months or a year from now we will better understand how HECM changes have impacted the marketplace, and whether additional modifications are necessary.

140,000

35.0

120,000

30.0

100,000

25.0

80,000

20.0

60,000

15.0

40,000

10.0

20,000

5.0

0

0.0

2009 2010 2011 2012 2013

2014

2015

2016

2017 2018

design, and financial planning will grow significantly. In addition, it follows that demand for reverse mortgage financing will also increase. What About a Recession? The economy began to right itself following the housing crash. The result has been a continuous expansion since June 2009, one of the longest on record. Existing home prices, as one example, were up in October, the “80th straight month of year-over-year gains” according to NAR.

next recession will be here by 2020, about a year from now. How will a recession impact the reverse mortgage marketplace? A recession does not necessarily mean home prices automatically or universally decline. In many recessions price growth continues, albeit at a generally reduced pace. However, if there was a widespread series of price reductions the impact would likely be mixed. “To the extent that house prices fall it potentially harms existing loans for servicers and FHA’s insurance risk while also reducing total funds

Expansions cannot go on forever, and many economists believe the

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DEC 2018 | ATTOM DATA SOLUTIONS

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