Comments on: Rising Health Care Costs - Their Effect on Your Retirement http://reversemortgagedaily.com/2008/04/21/rising-health-care-costs-their-effect-on-your-retirement/ Reverse Mortgage News and Information Mon, 08 Sep 2008 02:01:18 +0000 http://wordpress.org/?v=2.3.1 By: LTC Insurance http://reversemortgagedaily.com/2008/04/21/rising-health-care-costs-their-effect-on-your-retirement/#comment-6361 LTC Insurance Fri, 29 Aug 2008 18:46:14 +0000 http://reversemortgagedaily.com/2008/04/21/rising-health-care-costs-their-effect-on-your-retirement/#comment-6361 Are reverse mortgages the way to go for those who want to pass along their home to their children? What happens if you outlive your payments? Then you have no equity to fall back on, correct? Are reverse mortgages the way to go for those who want to pass along their home to their children? What happens if you outlive your payments? Then you have no equity to fall back on, correct?

]]> By: LTC Insurance http://reversemortgagedaily.com/2008/04/21/rising-health-care-costs-their-effect-on-your-retirement/#comment-6360 LTC Insurance Fri, 29 Aug 2008 18:33:32 +0000 http://reversemortgagedaily.com/2008/04/21/rising-health-care-costs-their-effect-on-your-retirement/#comment-6360 Are reverse mortgages really the way to go? What happens if you out-live your payments? Then you have no equity at all. Many depend on their homes as investments that can be passed on to their children. Are reverse mortgages really the way to go? What happens if you out-live your payments? Then you have no equity at all. Many depend on their homes as investments that can be passed on to their children.

]]> By: Canton Michigan Mortgage http://reversemortgagedaily.com/2008/04/21/rising-health-care-costs-their-effect-on-your-retirement/#comment-3985 Canton Michigan Mortgage Tue, 22 Apr 2008 16:49:26 +0000 http://reversemortgagedaily.com/2008/04/21/rising-health-care-costs-their-effect-on-your-retirement/#comment-3985 Intersting article. Well written. Amanda <3 Intersting article. Well written.

Amanda <3

]]> By: Abel Torres http://reversemortgagedaily.com/2008/04/21/rising-health-care-costs-their-effect-on-your-retirement/#comment-3983 Abel Torres Tue, 22 Apr 2008 13:26:40 +0000 http://reversemortgagedaily.com/2008/04/21/rising-health-care-costs-their-effect-on-your-retirement/#comment-3983 I think we need to focus on much more important news happening last and this week!!!. For those of you know dont know, just yesterday (4/21) Bank of America announced the suspension of their Independence Plan, right after Financial Freedom suspended their Cash Account Plan on Friday (4/18). The previous week (4/11) Countrywide suspended their Simple Equity Product and previously both Southwest Mortgage and Generation Mortgage had suspended their proprietary product. Although proprietary reverse mortgage products only represent 10% of all RM origination, these moves can have a profound effect on our bottom lines depending on the geographic area you are in (ie North East, Hawaii, and other high end areas in the country etc). I find it very strange that there has been no coverage at all of such drastic changes. As for the reasons, all lenders claim that the secondary market is no longer buying these products. That is obviously true because with the current real estate market crisis the home appreciation component of the RM risk analysis model has become the dominant factor.Folks in Wall Street and the secondary market look at repayment rate (combination of mortality rate and mobility rate) and future home appreciation as the important parameters for determining pricing and availability of thr product. Loosely speaking, repayment rate is more indicative of the timing when the loan will be repaid while future home appreciation is the primary determinant of how much cash is received upon sale of the home. The heart of the problem has to do with what is called the "Cross-over-Point" or the point in time where the Principal outstanding together with the acrued interest exceeds the home value. Once the cross-over-point is reached then a loss or point of diminished return is realized to the investors. Thus, here is an interesting deduction: The pull of proprietary reverse mortage product is created by the falling of future home appreciation (modelling) which is created the falling prices of real estate prices today, which was created by the credit crunch and subprime crises in the forward mortage market. Another deduction is that increasing the margin on these products will not cure the problem, because the cross over point is reached even faster. Now an interesting point: In the HUD guaranteed HECM product, the credit risk (what we just talked about) is absorved by HUD after assignment, so here there is no issued at all. Also we see the HECM secondary market demanding higher margins, because it will be HUD (and the tax payer) who mostlikely will deal with the loss. What does all this represent? The proprietary RM products offers will continue to be reduced unless home appreciation starts happening soon. Note: Both Countrywide and Financial Freedom did keep their proprietary products available to their retail outlet. Cheers I think we need to focus on much more important news happening last and this week!!!. For those of you know dont know, just yesterday (4/21) Bank of America announced the suspension of their Independence Plan, right after Financial Freedom suspended their Cash Account Plan on Friday (4/18). The previous week (4/11) Countrywide suspended their Simple Equity Product and previously both Southwest Mortgage and Generation Mortgage had suspended their proprietary product. Although proprietary reverse mortgage products only represent 10% of all RM origination, these moves can have a profound effect on our bottom lines depending on the geographic area you are in (ie North East, Hawaii, and other high end areas in the country etc).
I find it very strange that there has been no coverage at all of such drastic changes.
As for the reasons, all lenders claim that the secondary market is no longer buying these products. That is obviously true because with the current real estate market crisis the home appreciation component of the RM risk analysis model has become the dominant factor.Folks in Wall Street and the secondary market look at repayment rate (combination of mortality rate and mobility rate) and future home appreciation as the important parameters for determining pricing and availability of thr product. Loosely speaking, repayment rate is more indicative of the timing when the loan will be repaid while future home appreciation is the primary determinant of how much cash is received upon sale of the home. The heart of the problem has to do with what is called the “Cross-over-Point” or the point in time where the Principal outstanding together with the acrued interest exceeds the home value. Once the cross-over-point is reached then a loss or point of diminished return is realized to the investors.
Thus, here is an interesting deduction: The pull of proprietary reverse mortage product is created by the falling of future home appreciation (modelling) which is created the falling prices of real estate prices today, which was created by the credit crunch and subprime crises in the forward mortage market. Another deduction is that increasing the margin on these products will not cure the problem, because the cross over point is reached even faster.
Now an interesting point: In the HUD guaranteed HECM product, the credit risk (what we just talked about) is absorved by HUD after assignment, so here there is no issued at all. Also we see the HECM secondary market demanding higher margins, because it will be HUD (and the tax payer) who mostlikely will deal with the loss.
What does all this represent? The proprietary RM products offers will continue to be reduced unless home
appreciation starts happening soon.
Note: Both Countrywide and Financial Freedom did keep their proprietary products available to their retail outlet.

Cheers

]]>