June 20: Reverse Mortgage Primer - Product Attracting Forward Lenders?

A delightful angelic little boy was waiting for his mother outside the ladies' room of the gas station.

As he stood there, he was approached by a man who asked, "Sonny, can you tell me where the post office is?"

The little boy replied, "Sure! Just go straight down this street two blocks and turn to your right.  It's on the left."

The man thanked the boy kindly, complimented him on how bright he was and said, "I'm the new pastor in town. If you and your mommy come to church on Sunday, I'll show you how to get to Heaven."

The little boy replied with a chuckle; "You're kidding me, right? You can't even find the post office."

"People who don't give up attract other people's attention." As do people whose humor is stuck in 4th grade - like mine usually is. For example. Reverse mortgage news Given that 10,000 people a day are turning 62 (the minimum age to take out a reverse mortgage), plenty of "forward" lenders are looking at the channel, or are fostering divisions to capture the business & revenue. Reverse mortgages are a "costly blessing" to older people who have valuable homes, but not a lot of ready money. They allow people to borrow money to spend now, that only must be repaid (plus interest) when they, or their estate, finally sells their home. Real estate agents and financial planners are often offered help by lenders doing reverse mortgages: "We can help your clients navigate the tricky reverse mortgage waters. We know there is a lot of old information out there - let us help your clients learn the truth about what an HECM is and isn't." A reverse mortgage loan is available to homeowners age 62 or older and allows the homeowner to borrow the equity in their home minus fees and costs. It may only be secured by a primary residence for which all title holders are borrowers and are age 62 or over. To be eligible, borrowers must receive reverse mortgage counseling explaining the fees, costs, and ramifications of getting a reverse mortgage. Reverse mortgage payouts can be in the form of a line of credit or lump sum, with limits on the size of the lump sum payout. June 15 was World Elder Abuse Awareness Day (WEAAD), and the National Reverse Mortgage Lenders Association and the National Aging in Place Council launched new consumer webpages to "help older adults, and their loved ones, recognize the signs of abuse and report instances of financial fraud and exploitation to the appropriate authorities. Through their combined audience of more than 36,000 monthly website visitors, the organizations hope to provide more seniors with the tools to protect themselves from scams and abuse." Visit Recognize and Report Elder Financial Abuse on NRMLA's consumer education website at www.reversemortgage.org. The Las Vegas Sun recently had an article about the pros and cons of reverse mortgages. Even the Huffington Post is telling consumers how to shop for a reverse mortgage. Total new HMBS production issuance dropped from $584MM in April to $543MM in May, but as an industry, we continue to perform about 20% better year over year in total. The $543MM of new prod created in May is roughly 121% of UPB issued in same month 2016. This improvement is down slightly from the 127% improvement YoY we clocked in April. Four of the top five issuers saw a fall in issuance in May. For the 28th consecutive month, AAG leads all industry participants in new production issuance. In May, total new production issuance slipped to $128MM, good for 23.6% market share, down a bit from $159MM and 27% market share in April. The #2 spot goes to FAR as the only top 5 issuer to show an increase in issuance month over month. Market share increased from 16.2% to 20.5% as issuance levels look consistent and strong across all 3 HECM rate varieties. RMF ranked third in May as total new issuances declined by ~$2MM to $101MM month over month. Ocwen was fourth with $98.7MM in new production pools. Ocwen remains the 2nd largest issuer of fixed-rate paper, finishing just $2MM shy of AAG for the fixed rate crown. In 5th place, LiveWell issued $50MM in May vs $59MM in Apr, as the firm saw market share fall slightly from 10.2% to 9.2%.  As always, fully interactive charts are on our site available here. George Brooks with IMF reports that lenders originated $4.5 billion of new home equity conversion mortgages in the first quarter in his story, "Reverse Mortgage Lending on the Rise Again, but..." "Compared to the same period a year earlier, production increased by 16.6 percent. Purchase reverse mortgages comprised 83.6 percent of HECMs produced during the period. Borrowers appeared to favor reverse mortgages with adjustable rates over fixed-rate HECMs, which accounted for only 10.7 percent of HECMs in the first quarter. Despite increased originations in the first quarter, FHA data show a gradual decline in HECM endorsements since peaking in FY 2009 with $114.7 billion. For the full story and an exclusive look at the nation's top 100 reverse lenders, see the new edition of Inside FHA/VA Lending, now available online." How much so you really understand about a HECM Reverse Mortgage? One advantage is that it does not impose a monthly payment burden on the borrower. The disadvantage is that the reverse mortgage will cover only about 50-60% of the house price, depending on the borrower's age, requiring the purchaser to find the remaining needed cash elsewhere. The most common source is asset liquidation. If you know anyone considering or that should consider this program, This HUFFPOST article will help give you some insight. Recognizing the significant improvements that have been made to the HECM program that reduce risk to the MMI Fund and ensure responsible lending to aging homeowners, President Trump published a proposed Fiscal Year 2018 budget that would permanently remove the cap on the aggregate number of reverse mortgages that FHA can insure. Click here to read the full article. There is training. For example, Plaza offers a presentation designed to help financial planners and loan professionals to better understand how Plaza's Reverse Mortgage can be used as a vital part of an overall retirement strategy and not just a loan of last resort. The lending sector certainly receives its share of "bad actors" which the press highlights. For example, recent headlines blared, "Chicago man accused of stealing $10M in reverse mortgage scheme." "The Federal Trade Commission filed a civil suit against him in 2003. The Illinois Department of Financial and Professional Regulation suspended his loan originator registration in 2010. But it took until Mark Steven Diamond - who also went by the name Mark Stevens - was accused of stealing a total of $10 million of equity in the homes of at least 122 elderly victims before he was arrested on Monday and, on Tuesday, upon appearing in federal court, was charged with wire fraud and engaging in a financial scheme, according to FBI Special Agent Garrett Croon, a media coordinator for Chicago." The oldest victim was 98. "Mark Diamond caused certain elderly homeowners to execute reverse mortgage loan documents, despite the fact that they were disabled or otherwise unable to understand the reverse mortgage loan documents," said Kelly Popovits, a special agent with the United States Department of HUD, Office of Inspector General. Diamond, 60 and of Chicago, is suspected of working with at least five co-conspirators, officials said, defrauding seniors by fraudulently obtaining home loans in their names and keeping the profits..." Capital markets On the short end of the yield curve, where do the Fed Funds futures stand after the FOMC meeting last week? For the upcoming July meeting, a 97% chance of no changes to rates. For the Sep meeting, an 87% chance of no changes, and for December a 54% chance of no moves. And who knows what will happen in the next six months. The flattening of the yield curve yesterday means that the 5-year Treasury yield is within two basis points of a three-week high while the 30-year yield is within one basis point of a seven-month low. Be careful what you wish for: a flattening yield curve is often indicative of a slowing economy. NY Fed President Dudley expects wages and inflation to pick up and for the Fed to continue to remove policy accommodation, especially as he thought halting it would jeopardize the recovery. Given the lack of news, it seems traders and investors latched onto that, and the 10-year note price worsened .250 and its yield closed at 2.19% while agency MBS prices sold off about .125. Not much news today (some current account trade figure) although oil prices are dropping significantly, and there are three speakers from the Federal Reserve which may make things interesting. We commence Tuesday with the 10-year yielding 2.17% and agency MBS prices are making up the .125 they lost yesterday.