PJ's Reverse Mortgage Blog

July 13th, 2011 9:20 AM

If Congress Fails to Raise Debt Ceiling, FHA Lending Could See Sudden Halt

July 11th, 2011 | by Elizabeth Ecker Published If the government fails to come to debt limit terms, it could cost the mortgage industry—in a big way.

If the debt limit is not raised through government action by the deadline of August 2, the Federal Housing Administration, as a “non-essential” government agency, could go on hiatus as part of an overall government shutdown, according to a Center for American Progress report.

In the report, titled “Federal Debt Freeze Disaster Looming for Housing Market,” author David Min, associate director for financial markets policy at the Washington, D.C.-based think tank, indicates that an FHA shutdown would eliminate potential homebuyers, cause significant delays for everyone else, and would exacerbate an already struggling housing sector.

Without FHA, there would be few to no loans insured by the government agency, including the 99% of reverse mortgages it currently insures, thus it could have major implications for reverse mortgages.

When asked for confirmation that FHA could shut down under the potential debt limit circumstances, the Department of Housing and Urban declined to comment for RMD.

Whether the debt ceiling will be raised has been a topic of widespread speculation in recent weeks as President Obama has met with republican and democratic leaders to tackle the debt ceiling problem. If the ceiling is not raised before the deadline, a government shutdown would ensue.

Min says that FHA is a relatively low priority when it comes to items on the federal government’s list of expenses, and if FHA faces a freeze resulting from the debt issues, there will be very little activity for lending.

“Lenders make the loan knowing they can get FHA insurance,” Min told RMD. “What will happen is that if FHA shuts down, the approval process will be delayed as long as it is shut down. [Lenders] may see some FHA-qualifying loans happen during that period, but there’s limited capacity.”

Taken a step further, another potential outcome of a government debt default could be a change in the HMBS market.

“If government really defaulted on debt, it would remove some of the benefit to HMBS since it would get traded lower relative to other mortgage securities not backed by the federal government,” says John Lunde, president of Reverse Market Insight, noting that a default scenario is extremely unlikely. In theory, however, “[It] might close a bit of the gap with potential proprietary products, but there’s still a long way to go there. And this is the single worst way to close that gap I can think of.”

In the most recent debt talks in Washington, President Obama’s said he would oppose any short-term agreement in an effort to get past August deadline. Additionally, he said Republicans opponents will have to concede on revenues.

Written by Elizabeth Ecker

Posted by Phillis Jackson on July 13th, 2011 9:20 AMPost a Comment (0)

More changes to Reverse Mortgages coming in 2011

February 1st, 2010 6:00 PM

Seniors considering a Reverse Mortgage should not wait long as the talk around Washington DC is for future changes that will cost borrowers dollars.

HUD Secretary Donovan reported today, there would be long term reforms in the reverse mortgage program down the line, but that the $250 million subsidy “is a reaction to last year’s adjustments to make sure the program does not limit its availability to seniors.”

Also the 2011 Budget requests an increase in the ongoing annual Mortgage Insurance Premium (MIP) from .5% to 1.25% and a low-to-mid single digit cut in the principal loan limit with the higher end affecting older borrowers.

Posted by Phillis Jackson on February 1st, 2010 6:00 PMPost a Comment (3)

HUD cuts 10% from Principal Limit Seniors receive on Reverse Mtg.

September 23rd, 2009 4:31 PM

HUD has posted a Mortgagee Letter implementing the 10% haircut in principal limit factors, effective for all loans on which applications are taken on or after October 1, 2009.

The bottom line is, if you are thinking of getting a reverse mortgage, Get your application in before the 1st of October, or lose 10% of your principal limit.

I believe there may be more changes to come in the Reverse MOrtgage industry.

Posted by Phillis Jackson on September 23rd, 2009 4:31 PMPost a Comment (0)

Title Company MAY NOT insure some Reverses

September 1st, 2009 9:00 AM

It has come to my attention, that a large Title Company has purposed in a inside bulliten, that it may no longer insure Reverse Mortgages that require a lump sum distribution at closing. That would be ALL fixed rate HECMs, save the ones that, exactly, pays off a first lien mortgage already in place.

Not good news. I'll keep you posted. PJ :)

Posted by Phillis Jackson on September 1st, 2009 9:00 AMPost a Comment (2)

Reverse Mortgages in the future??

July 13th, 2009 5:21 PM

What an opportunity we have right NOW in TEXAS. As senior citizens, think of the possibility for a retirement with financial freedom and independence.

As I type this post, I am wondering how the Reverse Mortgage business will change in the next few years. Are interest rates going to go up and will many senior citizens be wishing they had closed on a reverse mortgage sooner?

Or will property values in Texas go the way of property values in other parts of the country? Again, will many seniors wish they had gotten their equity out while values were still high in Texas?

Will retirement funds continue as ever dwindeling commodities?

Savoy Seniors are looking into the reverse mortgages, to see IF they can benefit. You will never know unless you ask. There is no cost for a quote!

God bless, PJ :)

Posted by Phillis Jackson on July 13th, 2009 5:21 PMPost a Comment (0)

FYI here is the Update on Reverse Mortgage for purchase inTexas from NRMLA VP Darryl Hicks

April 3rd, 2009 1:30 PM

NRMLA MEMBER ALERT: HECM for PURCHASE IN TEXAS

We want to alert NRMLA members of concerns raised regarding the offering of a true HECM for purchase loan program in Texas. There are technicalities in the Texas Constitution and related homestead laws that must be met in order to obtain a valid lien in homestead property in Texas. It is presently unclear whether the provisions in the Texas State Constitution that authorize and govern reverse mortgage transactions in Texas contemplate a purchase money reverse mortgage transaction. Legislative changes (and related Constitutional amendments) or regulatory interpretive guidance may be desirable in order to address this issue. However, while enabling legislation (and related Constitutional amendments) may be prudent, given the nature of the Texas legislative process, unfortunately, currently it seems unlikely that the legislative process in Texas will allow us to address the matter this year.

This alert is not meant to serve as legal advice. NRMLA counsel has consulted with Texas counsel, Texas title agencies and several other settlement service providers (including document preparation companies), and NRMLA continues to consider several avenues to address this matter. Until further clarification is gained, we urge members to consult with their own vendors and counsel and compliance experts for advice and possible alternatives in assisting seniors with their home purchase financing and reverse mortgage needs in Texas.

Darryl Hicks, Vice President
Communications

Posted by Phillis Jackson on April 3rd, 2009 1:30 PMPost a Comment (0)

Great opportunity!

March 24th, 2009 4:08 PM

What a great opportunity we have for the rest of 2009. We have the new $625,000 FHA limits HUD approved for Reverse Mortgages, at least through the end of the year. Interest rates in the fixed programs are lower than I have EVER seen them.

Seniors have a golden opportunity to access equity from their home and never have to pay it back, as long as they live in the home. Where else can you get a loan on the equity from your home without making any payments?

I have thought a lot about that, and I come up with "No where". It is Government insured too!

OH my, sometimes our Government does do the right thing!

God bless. PJ :)

Posted by Phillis Jackson on March 24th, 2009 4:08 PMPost a Comment (0)

Info Reverse in TX

March 21st, 2009 10:06 AM

FYI, here is a "draft" alert NRMLA is sending out next week.

Thanks for staying on top of this.

NRMLA MEMBER ALERT: HECM for PURCHASE IN TEXAS

We want to alert NRMLA members of legal and technical concerns being raised that will preclude the HECM for purchase product from being offered in Texas. There are technicalities in the Texas Constitution and related homestead law that prevent lending under a HECM for purchase product in the state of Texas. Given the nature of the Texas legislative process, this will not be an issue that will be resolved in the near future.

We simply want to alert the industry of the issue and assure the industry that NRMLA is addressing this matter from many angles. Unfortunately the legislative process in Texas will not allow us to address the matter this year (we are constrained by the legislative process).

This alert is not meant to serve as legal advice. We urge members to consult with their own counsel and compliance experts for advice.

"Phillis ama" <pkjackson@amaonline.com>

Posted by Phillis Jackson on March 21st, 2009 10:06 AMPost a Comment (0)

Reverse for purchase in TX

March 19th, 2009 3:50 PM

As far as I know there is only one mortgage bank willing to risk closing reverse mortgages for purchase in TX. Out of all the banks closing triditional HECMs that seems a little suspect. I guess someone has to be the proverbial Guinea Pig.

God bless 'em and you! :) PJ

Posted by Phillis Jackson on March 19th, 2009 3:50 PMPost a Comment (1)

FHA protects seniors from unscrupulous lenders

March 19th, 2009 11:07 AM

Effective October 1, 2008 HUD has made changes to rules regarding who can originate or receive compensation for HECM (reverse mortgages) through FHA. Effective with that date, no reverse mortgage loan may be closed with a payment to a third party that is not an FHA approved lender.

A HECM mortgage originator or any other party that participates in the origination of a FHA insured HECM mortgage shall (1) not participate in, or be associated with, or employ any party that participates in or is associated with, any other financial or insurance activity; or (2) demonstrate to the Secretary of HUD that the mortgagee or other party maintains, or will maintain, firewalls and other safeguards designed to ensure that (i) individuals participating in the origination of a HECM mortgage have no involvement with, or incentive to provide the mortgagor with, any other financial or insurance product; and (ii) the mortgagor shall not be required, directly or indirectly, as a condition of obtaining a mortgage under this section, to purchase any other financial or insurance product.

FHA advises that mortgagees must not condition a HECM mortgage on the purchase of any other financial or insurance product, and should strive to establish, consistent with the new law, firewalls and other safeguards to ensure there is no undue pressure or appearance of pressure for a mortgagor to purchase another product of the mortgage originator or mortgage originator’s company.

Loan origination must be performed by FHA approved entities including: (1) a FHA-approved loan correspondent and sponsor; (2) a FHA approved mortgagee through its retail channel; or (3) a FHA-approved mortgagee working with another FHA-approved mortgagee.

MORTGAGEE LETTER 2008-14, WHICH PROVIDED GUIDANCE REGARDING THE WAYS IN WHICH A NON-APPROVED ENTITY OR THIRD PARTY MAY PARTICIPATE AND BE COMPENSATED, IS RESCINDED, EFFECTIVE ON OCTOBER 1, 2008. Beginning with case number assignments made on or after that date, only FHA-approved mortgagees, as described above, may participate and be compensated for the origination of HECMs to be insured by FHA.

Posted by Phillis Jackson on March 19th, 2009 11:07 AMPost a Comment (0)