New Reverse Mortgage Condo Guidelines

Jan. 29, 2010  This past Friday, Michael Branson of All Reverse Mortgage       Company posted a very informative article on HUD changing the rules for seniors living in condos to obtain a reverse mortgage. Among the changes that RMOs should note: RMOs must now collect all condo docs, a very tall order. Prepare to wait at least 8 weeks for HUD to approve the project. Be leery of using the "Site Condo" designation, it could ruin your deal. Be aware that HUD plans to require that all condo projects be re-approved in January of 2011. The bottom line is for your seniors living in condos, they must be more patient, more responsive and more decisive in moving forward on going through with a reverse mortgage.

Free Reverse Mortgage Counseling

As older adults continue to face financial challenges in the ongoing economic downturn, the National Council on Aging (NCOA) will offer free counseling for seniors through its Reverse Mortgage Counseling Services (RMCS) Network. For the next three months, RMCS counselors are waiving the usual $125 counseling fee in order to help more homeowners understand how reverse mortgage loans, along with community programs and other options, could help them to remain in their homes. Consumers age 62+ can schedule a free reverse mortgage counseling session through April 30, 2010 by calling 1-800-510-0301.

Reverse mortgages are not the next subprime

Jack Guttentag is professor of finance emeritus at the Wharton School of the University of PennsylvaniaIn 2009, about 130,000 HECMs were written. Feedback from borrowers has been largely positive. In a 2006 survey of borrowers by AARP, 93 percent said their reverse mortgage had had a mostly positive effect on their lives, compared with 3 percent who said the effect was mostly negative. Some 93 percent of borrowers reported that they were satisfied with their experiences with lenders, and 95 percent reported that they were satisfied with their counselors. (All HECM borrowers must undergo counseling prior to the deal. Subprime loans imposed repayment obligations on borrowers, many of whom were woefully unprepared to assume them, and which tended to rise over time. The financial crisis actually began with the increasing inability of subprime borrowers to make their payments, and as a result, defaults and foreclosures ballooned to unprecedented levels.
But reverse-mortgage borrowers assume no repayment obligation at all. Their only obligations are to maintain their property and pay their property taxes, which they have to do as owners whether they take out a reverse mortgage or not. They cannot default on their mortgage because the obligation to make payments under an HECM is the lender's, not the borrower's. There are no reverse-mortgage foreclosures.
Subprime foreclosures imposed heavy losses on lenders and on investors in mortgage securities issued against subprime mortgages. Such securities were widely held by investors, which included Fannie Mae and Freddie Mac. Losses by the agencies on their subprime securities played a major role in their insolvency. In contrast, no lenders have suffered or will suffer losses on HECMs because they are insured against loss by the FHA. The FHA assumes the losses when HECM loan balances grow to the point where they exceed property values. In sum, the current state of the HECM market has no resemblance whatsoever to the conditions in the subprime market that led to disaster

Reverse Mortgages provide a cash cushion

BY SAUL FRIEDMAN MCCLATCHY-TRIBUNE NEWS SERVICE
Many older homeowners are just getting by -- or worse. Retirement savings plans are down. Those 401(k)s have not grown enough to be counted on for retirement. Pension funds are hurting.  But if you're an older homeowner with sufficient equity to qualify, there could be some relief in a Home Equity Conversion Mortgage, also known as a reverse mortgage.
This type of mortgage allows homeowners 62 and older to convert part of the equity in their homes into tax-free cash without having to sell the home, give up the title, or take on a new monthly mortgage payment. It's called a reverse mortgage because instead of the homeowner making a payment to the lender, the lender makes payments to the homeowner. The lender eventually gets its money back when the home is sold or the owner dies. Any excess cash made from the home sale is returned to the owner or the owner's estate. The Federal Housing Administration guarantees the mortgage, meaning the borrower is protected from losing the property, and the lender is protected from losing the money, if the value of the property declines below the worth of the loan.
The proceeds may be taken as a line of credit or as payments.
Few have taken advantage of it, partly because they don't like to mortgage a home that's free and clear, or they're concerned about heirs. For fiscal year 2009, which ended Sept. 30, there were 114,692 reverse mortgages done in the United States. For Michigan, there were 2,088 reverse mortgages done in that same period.

USA Today Examines New Appraisal Guideline

USA Today recently examined the FHA’s forthcoming adoption of select HVCC guidelines, and how the change will affect consumers. The article voiced opinions from components of the change including quotes from the National Association of Realtors (NAR) and the Appraisal Institute (AI), as well as counter comments from the Title/Appraisal Vendor Management Association (TAVMA) who are largely in favor of the guidelines. The article specifies how members of NAR and AI feel the changes, and other efforts to reform the industry, are hurting consumers and appraisers alike. These entities feel forcing lenders to use third party appraisal management company’s causes two main problems. 1) Appraisal management companies are providing appraisers — often from outside the market where the house is located — who are less qualified than independent appraisers that brokers and Realtors might choose. 2) Turn times of the appraisal process have increased significantly as NAR explained a member survey found almost 70% saying appraisal times had risen by more than eight days under the new rules. In contrast, the article quoted Don Blanchard, former president of TAVMA who stated, “It is mistaken to say appraisal management companies a re the cause of these values. It's the market," Furthermore the article sited TAVMA’s support of third party appraisal parties as they feel these firms provide well-qualified appraisers on a regular basis.

Prosecutions of Reverse Mortgage Defrauder

Written by Daily News
A former Southern California mortgage broker was sentenced to six years in prison last Friday, for defrauding an 86-year-old San Francisco woman out of $140,000. The woman responded to a mailing in February of 2008 from a company in Orange County that was advertising reverse mortgages. She then began working with employee John McTaggert and agreed to obtain a legitimate Reverse Mortgage.
In short, Mctaggert got the woman to sign over $140,000 from the reverse mortgage, promising to invest it and instead, deposited the money into his own bank account, quit his job, and moved to Memphis, Tennessee. After his arrest in March of 2009, prosecutors were able to charge McTaggart with one count of first-degree burglary because the mortgage and annuity deals were negotiated in the woman’s home.
Although these cases are few and far between, (only several hundred out 400,00+), it is never something that the industry looks forward to hearing about. Furthermore, it is clear that the reverse community is in full support of proper sentencing and punishment for all individuals even considering defrauding the very seniors that our product is meant to be helping.