Despite only a slight increase in endorsed units, max claim volume grew 25% compared to the prior Fiscal Year total of $24.2 billion.

According to data from Reverse Market Insight, 22% of the increase in volume comes from the lending limit increase, and the remaining 3% stems from the additional units in FY 2009.  In addition, the shift to the fixed rate product has also been a factor.

“The shift to the fixed rate product further magnifies the increased dollar volumes spurred by higher lending limits, as the unpaid principal balance (UPB) is up 31% for FY 2009,” said John K. Lunde, President of RM Insight.

“At a time when declining home values and recession dominated the headlines, our industry acted as a key safety net for seniors and provided more funds to more customers in FY 2009 than ever before.”

Looking at the calendar year numbers is even more telling, while units were down 2.9% in 2009, the max claim amount and UPB totals were up 26% and 42% respectively from the last year.

Whether or not the industry will continue to grow in Fiscal Year 2010 is another story.  The Office of Management and Budget is predicting the industry will endorse 120,429 units in 2010 while FHA’s Outlook Report shows a prediction of 106,875 units for FY 2010.

President Obama proposed a new tax on the nation’s biggest banks to pay for the financial bailout. Several leading reverse mortgage lenders, such as Bank of America, MetLife, and Wells Fargo, are included in this category.

The Federal Housing Administration (FHA) announced a series of sweeping changes on Wednesday to help the agency restore its financial reserves and reduce its risk.

HUD announced this week that it’s expanding a temporary policy to help borrowers access FHA mortgage insurance and allow for quick resale of foreclosed homes. HECMs are specifically exempted.

With the victory of Scott Brown (R-MA) in the special election to fill the late Senator Ted Kennedy’s seat, the Democrats have lost their 2/3 majority in the Senate, enough to overcome any vetoes.

Brown’s victory also concerns Democrats who are worried that their party will suffer heavy losses in the midterm elections this fall.

President Obama’s State of the Union address is planned for January 27, 2010.

“Everyone in the industry was really excited about it when we realized we were going to get the HECM for Purchase product,” said Monte Howard, Affinity Relationship Director at Generation Mortgage.  But this excitement has proven to be short-lived as the dramatic burst in business has yet to be realized.

After several conversations with professionals in all parts of the reverse mortgage industry, it is clear the problem with the unique reverse mortgage for purchase program is education.  This education needs to take place on several levels, but the first is educating Realtors.

Derry Hampton, a reverse mortgage professional at Security 1 Lending and a licensed Realtor, pointed out just how little realtors know about the product.
“No one’s talking to Realtors about how this can fit into their business,” said Hampton, “I think really it’s up to the reverse mortgage industry to learn how to work with the real estate industry.”
A member of the National Association of Realtors (NAR) and the California Association of Realtors (CAR), Hampton added, “In California alone, there are 170,000 members of the CAR – that’s the new market for the reverse mortgage industry… what we need to do is teach them about this product.”

“Our ability to access cost-effective and reliable sources of funding as a bank has allowed us to lower our cost of borrowing and pass the savings to our customers. The increase in originations during the last quarter is an early indication that our pricing strategy is working and that our reverse mortgage offering is being transformed from a niche product into a mainstream financial solution,” said Steven Ranson, President and CEO.

Earlier this year HomEquityBank received its federal bank charter allowing it to gather deposits and allow it to offer lower rates to consumers.

Ranson told the Wall Street Journal that they now charge 3.75% on a variable-rate reverse mortgage (its lowest ever), and only 1.5 percentage points above prime.  Five-year terms are available at 6.1%.

During the 2008 credit crunch, when funding rates soared, HomEquity’s rates were as high as prime plus 5 percentage points, according to Ranson.  “Pricing is now more comparable” to other options seniors may have, making a reverse mortgage far more appealing.

For years, the HUD’s “government housing” options, specifically FHA loans, were perceived as problematic and heavily wrapped in red tape. But the HUD has stepped up  – by trying programs that the private sector hasn’t been ready to digest, and by introducing and standing by the country’s most popular reverse mortgage products.

In 2009, when money was tight and jumbo loans became incredibly difficult to find, the FHA became the safety valve for many mortgage brokers. Some lenders report that FHA loans make up nearly 40 percent of their business – nearly double the volume of the past five years combined.

While the dark side of the agency has surfaced periodically over time (there have been allegations that some programs were labeled “inept, detrimental and costly” by the Office of Inspector General/OIG), the HUD and other government agencies have been a critical part of the public housing landscape.

The HUD believes that if the FHA went private, borrowers would be charged higher fees and interest rates than the FHA charges, resulting in fewer home ownership options. In addition, the sale of the FHA to private owners would not attract buyers offering a reasonable price.

The FHA insures loans so that if the borrower defaults, the lender is guaranteed to receive the outstanding mortgage amount. For the past 75 years, an FHA loan has been the primary low down-payment option for home buyers.

The FHA also has a home-improvement loan program, too, which has come in handy for those in need of cash and unable to get a home equity loan due to already high loan amounts or slumping home values. FHA Title 1 loans of up to $25,000 are available to owner occupants and investors who want to repair or improve their property. Up to $15,000 can be obtained regardless of the home value, and if you need $5,000 or less, no security is necessary.

A prime traditional FHA target – first-time homebuyers – are pushing the housing ladder. Many of them are new to this country, and analysts believe that the immigrants hold the keys not only to the residential building industry but also to the economy. That’s because many newcomers pay cash, reducing the concerns of escalating consumer debt, except in big-ticket purchases like homes. Therefore,  the HUD is the critical player at both ends of the housing finance ladder – first-time loans and reverse mortgages.

In 2009, the agency showed that it was the go-to player for all loans in between. It now has more than 5.2 million insured single-family mortgages and 13,000 insured multi-family projects in its portfolio.

An $18,000 federal government grant from the U.S. Department of Housing and Urban Development (HUD) will allow CCOA to provide free reverse mortgage / Home Equiy Conversion Mortgage (HECM) counseling (normally $125 per session) until the funds are exhausted.

The counseling is available at CCOA offices in Fayetteville and Bentonville, or over the phone. Sessions take about an hour, and clients simply seeking more information are welcome.

CCOA is a non-profit organization that has been providing Arkansas with free financial education, seminars, credit report reviews, debt management programs, and budget, credit, housing and bankruptcy counseling since 1995.  The organization has six locations across the state.
Customers looking for more information can click here to visit their website, or call (800) 889-4916

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The GSE updated the 1009 to comply with the Federal Housing Finance Agency (FHFA), and the Federal Housing Administration (FHA) requests to capture additional data during the loan origination/application process and loan delivery.

According to FNMA, the document has been updated to support loan originator ID and origination company ID.  The updated 1009 however, does include additional questions.

FNMA started supporting new data requirements in July 2009 and is now requiring that lenders use the new form as of July 1, 2010.

While the study included several different types of caregiving, a significant portion of those in the study was taking care of parents (36%).  The average caregiver was female (66%), 48 years old, and 34% of caregivers were taking care of two or more people. 51% were caring for adults aged 75 or older.

One of the major points of the study was that caregiving can place significant stresses on adult caregivers. Many had left jobs, passed up promotions, and cut back on hours to fulfill their caregiving responsibilities. A significant number (53%) reported loneliness and isolation, cutting back on time with friends and family.

Although 66% of those caring for the elderly said it was easy to set up their care, a reverse mortgage can help increase this further.  Using a reverse mortgage can help pay for health care and other caregiving responsibilities; keeping parents out of assisted living and nursing homes, while reducing the stress on caregivers.

Banks, brokers and savings and loans are happy to approve reverse mortgages because the FHA insures them, and so lenders will be repaid even if the value of the house falls below the balance of the loan. Many consumers also find reverse mortgages simpler to qualify for, because eligibility primarily involves a borrower’s age, home value and equity; not their income or credit history.

Earlier this year, Congress raised the FHA’s maximum loan limit considerably, to $625,500 (the amount a borrower actually receives depends on their age and the home value, but cannot exceed that amount) which will remain through 2010. The agency also set tougher standards for those providing the mandatory credit counseling for applicants.

For seniors who want to remain in their homes, reverse mortgages can provide a lump sum, monthly checks, a line of credit, or a combination of these. The loan is repaid when they pass away or move and the house is sold.  In the interim, borrowers use the money for various purposes: they pay off their first mortgages and no longer face those monthly payments; they pay down other kinds of debt; they acquire a nest egg for emergencies or money for their everyday expenses; they invest in their houses or in other assets.  A lot of people are paying for home modifications.  They want to age in place, so they’re getting ramps, stair lifts, a bathroom downstairs so everything’s on one floor, curbless showers, etc. They’re preparing their homes for their long-term care.

Reverse mortgages can be a very useful tool for seniors, but should be handled with care. The FHA insurance makes them more expensive than conventional mortgages from a bank, so they are probably not suitable for short-term uses; ordinary consumer loans, for those who can get them, may prove cheaper.  People should consider the long-term consequences, not just their immediate needs; it’s not free money. If you use your house as an A.T.M., you could jeopardize not only your financial situation, but your ability to continue to live in the house.

Visit our FAQ page to find out more about reverse mortgages, or give us a call, on 888-820-2627