FHA Increases Proceeds for Many Borrowers

Starting October 4, 2010, HUD is also lowering the effective interest rate floor from 5.50 to 5.00 percent. Because interest rates are so low, many reverse mortgage borrowers will receive more money than previously available, despite the principal limit reductions.

According to IBIS Software, a 70-year old borrower with an expected interest rate of 5.06% or less will receive $10,750 more on a $250,000 home compared to the previous principal limit factors.

Reverse Mortgage Applications Surge 39% in September

Reverse mortgage applications rose to the highest levels all year in September, up 39.1% from October according to a report from the Federal Housing Administration.

In September, 5,966 HECM loans were insured, with 5,587 being traditional reverse mortgages and the remainder as refinance or purchase transactions. For the year,79,106 HECM loans were endorsed with a max claim amount of $21.1 billion.

New Reverse Mortgage Product Available from FHA

The Federal Housing administration (FHA) has announced a new and modified version of its Home Equity Conversion Mortgage (HECM) product today. Effective October 4, 2010 borrowers will have the option of choosing the HECM Saver or the HECM Standard.
The HECM Saver is a second reverse mortgage option that will allow lowering upfront loan closing costs. The upfront Mortgage Insurance Premium (2% of the appraised value) has been essentially eliminated. Homeowners will qualify for a smaller amount than with the HECM Standard loan. The loan option is available for all HECM case numbers that are or will be assigned on October 4, 2010.

Congress Extends Higher HECM Loan Limits

Congress, last night, passed a continuing resolution that keeps the federal government funded through early December and extends the current maximum HECM loan limit of $625,500 through September 30, 2011.

The current maximum FHA single-family mortgage limit of $729,750 was also extended. Had the extension not been approved, the HECM loan limit would have reverted back to $417,000 after December 31.

FHA Raises Annual Premiums Charged to Reverse Mortgage Borrowers

The Department of Housing and Urban Development announced new changes to the mortgage insurance premiums for the Federal Housing Administration’s reverse mortgage program on Wednesday.

For all Home Equity Conversion Mortgages (HECM) with a case number assigned on or after October 4th, 2010, FHA will raise the annual mortgage insurance premium (MIP) charged to borrowers from 0.5% to 1.25%.

HUD Shares Plans for New Reverse Mortgage Option

HUD Deputy Assistant Secretary Vicky Bott shared the Department's plans to implement a new variant of the reverse mortgage, referred to as the "HECM Saver," that will provide seniors with a reverse mortgage option that significantly lowers upfront costs by virtually eliminating the upfront Mortgage Insurance Premium that is required under the standard HECM option. Bott also reported accompanying changes intended for the existing HECM product, now referred to as a "HECM Standard." The introduction of the HECM Saver and changes to the HECM Standard are expected to be effective shortly after the new federal fiscal year begins this October.

The primary difference between the two HECM options will be in the cost of the upfront Mortgage Insurance Premium (MIP) and the amount of the funds, or "principal limit," available to borrowers. The upfront Mortgage Insurance Premium is charged by the Federal Housing Administration to support its insurance fund. Under the HECM Standard option, the upfront MIP will remain at 2% of the value of the property (or 2% of the maximum FHA loan limit of $625,500, if the property has a value greater than that.) HECM Saver will have an upfront MIP of only .01% of the property's value, significantly reducing upfront costs.

Fannie Mae Bans Appraisal Cutting

Effective Sept. 1, Fannie Mae is prohibiting lenders who sell it loans from changing appraisers’ numbers. In guidance issued June 30, Fannie Mae said lenders must contact appraisers to “resolve” any disagreements about the valuation. If that’s not possible, they should order a second appraisal – not just chop the value supporting the real estate contract.
Appraisers applauded the new rule. Pat Turner, an appraiser in Richmond, Va., said Fannie’s new requirement “is great news for consumers” because loan underwriters hundreds of miles from the property “no longer will be able to change the appraiser’s valuation” simply because they pulled a lower number off a computer.

Congressman and Reverse Mortgage Lender Work to Save Seniors Home

When a Congressman, reverse mortgage lender, and a local church work together, good things can happen.

McLean approached Congressman Adam Schiff, who represents the 29th Congressional District, and requested his help to save the 80 year old woman’s home. Schiff immediately issued a Congressional Inquiry to Wachovia, outlining his concern that a senior homeowner with very little income could qualify for such a big loan.

Fed Says Reverse Mortgage Loans Pose Risks

The Federal Reserve and other top regulators said on Monday reverse mortgages pose "compliance and reputation risks" for lenders, and offered guidance to financial firms on how to avoid such pitfalls.
"Reverse mortgages present substantial risks both to institutions and to consumers, and, as with any type of loan that is secured by a consumer's home, it is crucial that consumers understand the terms of the product and the nature of their obligations," the regulators said in a statement.
"Lenders must institute controls to protect consumers and to minimize the compliance and reputation risks for the institutions themselves," they said.

Senate Passes FHA Bill, Could Allow Two Product Reverse Mortgage Solution

This could  give HUD the ability to adjust premiums for a two reverse mortgage product approach outlined by Colin Cushman, Director of Portfolio Analysis at HUD earlier this year during a conference in Washington, DC.
The proposal includes the current HECM product with higher annual premiums and the “HECM Saver” would provide borrowers with less in proceeds but without an upfront premium. Designed to be a pay as you go product, Cushman said it would help lower the risk to the FHA insurance fund and offer borrowers an additional option not currently available.

Right Financial Plan: Reverse Mortgages

Retirees are often house rich but cash poor, their homes being their largest assets. There used to be just three significant ways to get equity from a home:

- Sell it

- Rent it

- Borrow against it using either a cash-out refinance or a home-equity loan

- Reverse mortgages present a fourth option, allowing homeowners to receive some of the home’s equity without moving or making regular loan repayments. Reverse mortgages provide an alternative financing method (though an expensive one) that can help homeowners maintain their independence as well as an adequate standard of living.

Feds implement fingerprint/ID registration database for mortgage lenders

The government is creating a national registry/fingerprint database for mortgage lenders in the U.S.. Mortgage loan originators employed by mortgage brokers, banks, credit unions and thrifts will also have to be fingerprinted and sign up to a central registry to do business in future, according to final rules issued on Wednesday by the Federal Reserve and other regulators.

The mortgage industry came under tough scrutiny after the 2007-09 financial crisis, with some lawmakers and regulators sharply critical of underwriting standards and practices that were seen as so loose they helped foster a housing price bubble.

Congress is is expected to address systemic problems with Fannie Mae and Freddie Mac after the November mid term elections.

Reverse Mortgages: Right for You?

With the cost of living and life expectancy continuing to rise, senior citizens are facing a double whammy.

Add to that high insurance costs, medical expenses and mortgage payments, some retired individuals are struggling to keep their heads above water without a steady income coming in any more.

Looking for a revenue stream, some elderly homeowners are turning to reverse mortgages.

Reverse Mortgages: MSNBC ‘Consumer Man’ Gets It Wrong Says Industry Leader

Michael G. Branson, CEO, All Reverse Mortgage Company

I just read an article on reverse mortgages and how they can lead to big trouble. After I read the entire article, I became enraged. Not just angry, but really, really mad due to the fact that the man who calls himself the "ConsumerMan" obviously has no real understanding of the product and is reporting several items as "fact" that are completely false.

New Counseling Procedures Released For Reverse Mortgages

The U.S. Department of Housing and Urban Development (HUD), after nearly 2 years of studying and revisions, recently published new procedures governing the process for seniors who are counseled for federally insured Home Equity Conversion Mortgages (HECMs).

Before meeting with a prospective reverse mortgage borrower, a counselor must first mail, fax or email an information packet that includes: a document titled Preparing for Your Counseling Session (attached to the protocol), copy of loan comparisons, copy of the Total Annual Loan Cost (TALC), loan amortization schedule, and a copy of NCOA’s booklet, Use Your Home to Stay at Home.

As part of the process, counselors must ask 10 questions to ensure that a senior comprehends the reverse mortgage’s key elements and if the senior fails to answer at least five of the questions, the counselor may withhold the counseling certificate or schedule a follow up meeting.

Not enough cash? Get your priorities straight

Learn the art of compromise

What if you realize that you can't afford to pay for a home health aide to take care of Dad without doing serious damage to your own retirement plans? Rather than letting guilt subsume you, think about whether you can "massage your goal, and fulfill your need in a more creative way," suggests Nusbaum.

Is there another way to get to the same end result? If the goal is to get Dad the care he needs, you might look into whether he's eligible for government programs that would defray the costs; you might ask siblings to share the burden with you; or you might help him arrange a reverse mortgage.

5 Reasons To Secure a Reverse Mortgage Before October 1, 2010

1. Lower Costs: Lenders have been reducing the upfront costs.
2. Principal Limit Reduction: On October 1st, 2009 HUD implemented a 10% reduction in principal limits for its Federal Housing Administration (FHA) insured reverse mortgage product, the first ever reduction. FHA may consider a second reduction October 1, 2010.
3. Increase in the Mortgage Insurance Premium (MIP) from .5 to 1.25%. What this means to homeowners that get their Reverse Mortgage after this change is an overall increase in the cost of the loan.
4. Reverse Mortgage Appropriation? Included in the Obama Administration’s FY 2011 budget is a $250 million appropriation request to offset projected losses for the Federal Housing Administration’s reverse mortgage program. If congress does not provide the $250 million, FHA will be forced to reduce the amount of money available to seniors through the program by 21% according to testimony from Commissioner David Stevens earlier this year.
5. FHA Lending Limits are temporary through the end of 2010. Homeowners with homes valued between $417,000.00 and $625,000.00 would lose significant proceeds if the $625,000.00 limit goes away.

Former FHA official predicts ‘pivotal’ year for reverse mortgages

Former Federal Housing Administration Commissioner Brian Montgomery, who oversaw the nation’s most popular reverse mortgage product for nearly five years, sees a “pivotal” year ahead for the industry that allows seniors to tap the equity in their homes.

In 2009, the program’s fund suffered a $198 million shortfall that was generally attributed to the decline of home values, national media stories about unscrupulous lenders and a call by some legislators to keep reverse mortgages from becoming the next subprime debacle. In 2010, the shortfall is expected to be $250 million.

Because of the shortfalls, the principal limit factor has been tweaked to reduce the net amounts seniors can receive.

Financial Reform, Brings New Reverse Mortgage Oversight

The broader legislation also takes on consumer issues, including a key Obama administration proposal to create an agency tasked with policing most financial products sold to consumers. Housed in the Federal Reserve, the Consumer Financial Protection Bureau has the independent authority to write and enforce rules for consumer lending in mortgages, credit cards and other financial products.

The bill also includes new consumer protections for reverse mortgages.
Within the first year, the bureau is tasked with conducting a reverse mortgage study to determine any deceptive or abusive practices. It will also determine whether suitability standards are necessary, as well as safeguards to protect consumers from being sold reverse mortgages to fund inappropriate annuities, investments, and other financial products.

The bureau has the authority to issue regulations, orders, or guidance that apply to reverse mortgages prior to the completion of the study.

TIME Admits Using Old "Study" for New Reverse Mortgage Article

Last week Time Magazine posted a very inflammatory article on the reverse mortgage industry. Then, they print a correction. In our day we were taught to measure twice; cut once.

"The original version of this story relied on a study of reverse mortgage fees that was three years old. Since then, new federal guidelines have brought down the expense of reverse mortgages."