Jim Cramer’s The Street Says Reverse Mortgages Get More Attractive
December 10th, 2008 | by admin Published in Lenders, News, Reverse Mortgage | 10 Comments
Jim Cramer’s TheStreet.com recently published an article about the changes that stem from the Housing and Economic Recovery Act of 2008. Even with the fees being capped, The Street reports that critics still think reverse mortgages are expensive.
Peter Bell, president of the National Reverse Mortgage Lenders Association, an industry advocacy group, admits these loans are "complex," and advises candidates to speak "openly and candidly" to counselors before taking the plunge. But he doesn’t think reverse mortgages are expensive.
"Compared to what?" he says. "We’re saying, ‘I’ll give you a loan for an unidentifiable amount of money, you can have it for an unknown amount of time and you may pay me back less than I gave you.’ There’s no other loan like that. With a forward mortgage, you pay interest and fees every month. We have to collect that money upfront."
Amen.
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December 11th, 2008 at 12:12 am (#)
I totally agree with Peter Bell. The closing cost of
a HECM Reverse Mortgage is reasonable.when one considers
that most of the present day value of our homes was created by inflation. There are at least 101 mortgage plans in the market,
but none ,other than a HECM Reverse Mortgages offers the surety and financial freedom for Senior Homeowners.
Since 1989 the plan has improved and now represents a most generous option for people with equity in their properties to live their lives without fear of financial disaster.
Closing cost are incorporated into the package, with no cash out of pocket for Seniors.
Many countries now have variations of Reverse Mortgages, but
none come close to the newly amended FHA HECM plan ,which
becomes fully effective January 1, 2009.
December 11th, 2008 at 8:27 am (#)
I am a reverse mortgage consultant. I have done many reverse mortgages and all of the seniors I helped with the reverse loan are so pleased with the results. They can now utilize the monies stored in the equity of their homes, rather than deduct from stocks(which have dropped) or their 401 k’s or Ira’s. It is a perfect solution to have money available to use with out having to make payments on it till they move out, sell or pass away.
December 11th, 2008 at 11:37 am (#)
Good thoughts! As an industry, we remain relatively silent about the mortgage insurance issue. Its costs are disproportionately high – particularly with the new lending limit – as compared to the overall “closing costs”. Well over 50% of the “high closing costs” are paid directly to the government to fund mortgage insurance. If the average life of a reverse mortgage is still between 7 and 8 years before it is paid off, more attention should be focused on the 2%. The reverse mortgage industry shouldn’t be asked to fund Barney Frank’s other mortgage industry challenges!
December 11th, 2008 at 12:02 pm (#)
I am in agreement with you, Larry. I would also like lenders to adjust origination fees according to the circumstances of each borrower .
December 11th, 2008 at 4:03 pm (#)
Karen,
I could be wrong but I don’t think Larry was saying lenders should alter the origination fee according to circumstances…that would never happen anyhow. He is talking about the governments 2% MIP plus .5% MIP throughout the loan as being to high. We as lenders have already taken our fair share of cost cutting… its now time for the government to take their cut. DON’T HOLD YOUR BREATH!
December 11th, 2008 at 4:50 pm (#)
David
Your response to Karen is consistent with the comments I
have heard from HECM FHA lenders. We compromised with AARP
and took a reduction in origination fees. We need to have
adequate funds to pay our originators and staff. The new
2% first $200,000 plus 1% for any excess ,not to exceed
$6,000 is fair to lenders and to Seniors.
If the FHA MIP pool is healthy,perhaps a drop of 1/2%
of origination fee could be welcomed news. Bob LaFay
December 11th, 2008 at 5:06 pm (#)
Bob,
From what I understand the government is saying the MIP pool is not healthy. This is why I stating not to HOLD YOUR BREATH. Even if it were healthy it would be a long shot for the gov’t to take a cut.
I think I heard at one time they pool our MIP with the normal forward MIP. Therefore, the hit to the pool would be much greater. Not sure about this though.
December 11th, 2008 at 6:52 pm (#)
I agree with Bob’s comments. My whole point is that we serve the senior community who must be treated fairly and all of our dealings must be above reproach. Certain political figures seem bent on hurting the reverse mortgage industry’s image in the public’s mind – and they attack us on high costs. Never once have I heard of a public figure acknowledging the dis- proportionate share the government takes to fund the insurance portion of closing costs and monthly premiums. There ought to be a movement to segregate the reverse mortgage insurance fund from any/all other insurance fund(s). Because the major media so strongly supports the liberal direction our country is taking,they will never address this subject. The senior community should not be asked to fund the government’s mismanagement of the insurance fund. Critics of the reverse mortgage industry need to address the government’s role in keeping “closing costs” at their current levels. ‘Nuf said. I rest my case!
December 11th, 2008 at 11:00 pm (#)
David,
Thanks for the input: my impression has always been that
the MIP pool for Reverse Mortgages HECM FHA is a stand alone
pool and not co mingled with the Forward Mortgage Pool of FHA
I also hear that the RM pool is quite healthy.
Can anyone corroborate and elaborate upon this subject?
It is noteworthy that the upfront MIP for new Reverse Mortgages
is higher than the standard FHA front fee. That is due to
increase in January, 2009, but still will be lower than HECM
fee of 2 points up front.
December 11th, 2008 at 11:17 pm (#)
Larry,
Please reference my post to David. I am open to any
and all information about the HECM MIP Reserve. It should
be of great import to all in the industry and to writers
who make sweeping statements about one of the best products
ever devised to address the financial needs of our Senior people
who have substantial equity in their homes.
Reverse Mortgages as offered by HECM FHA can be a great financial
tool for the management of their assets.