changes to reverse mortgages
Due to a situation that has created a situation in the MIP fund, there will be some changes taking place for Reverse loans. I am sharing an article that discusses the possible changes but until HUD comes out with a Mortgagee Letter at the end of this month, it is not certain exactly what they may be, other than a moratorium on the Standard Fixed rate reverse mortgage.
This is a lengthy article and too long for posting, so I will be sharing it over the next few days.
The Year Ahead for Reverse Mortgages: 2013
January 13th, 2013 | by Elizabeth Ecker Published in FHA, HECM, News, Ocwen, Reverse Mortgage, RMS, Security One, Walter Investment | 10 Comments
Within the next 30 days, the reverse mortgage industry will likely have lost its most popular product.
The Department of Housing and Urban Development promised Congress in December that the fixed rate HECM standard will become a thing of the past this month and many wonder if the business will lose its identity as a result.
The elimination of the industry’s most popular product leads to one big question: Will borrowers continue to choose reverse mortgages if the standard upfront full draw is no longer available?
On the surface, this would appear a dramatic shift in the business, but it may not necessarily mean such major change for originators or the borrowers served by the product.
The product changes
The fixed-rate product currently comprises about 70% of new reverse mortgage loans, indicating a strong shift from two years ago when the adjustable rate product was the only one available. HUD has since introduced the HECM Saver, a very large majority of which are taken at an adjustable rate, but still comprising only a fraction of total reverse mortgages.
Originators will have to shift to a market with a markedly different product mix, but analysts say volume will likely remain at a stable level.
“Removing the fixed Standard product is not a direct effect on volume from consumers (in comparison to a principal limit factor reduction that would have a direct impact), as it would seem very likely that borrowers simply use the ARM if that’s what’s available,” says John Lunde, president of Reverse Market Insight. “That might be a bad assumption if borrowers truly feel strongly enough about wanting a fixed that they wouldn’t take the loan if fixed isn’t available, but before fixed was prevalent in 2009 onward that didn’t seem to be an issue.”