And she must intentionally be grandstanding for her own benefit, at the expense of our seniors well-being, both financially, and emotionally, musn't she?

She must know a great many of the things she says are not true as well.

Peter Bell has gone to great pains to educate her, yet she keeps on with her “scare message.” Why?

I don't find this at all helpful for our seniors, and that is who is supposed to be important here, not the senator's political career.

Let's get our priorities straight, senator.

Again, I apologize if my comments appeared to be criticizing your information!

We may not always agree but one thing is true, this industry will suffer a huge loss if you ever leave it. Enjoy the 4th. You deserve it.

Good evening. You present your case very well. I understand where you are coming from with the HECM as far as who's needs it serves best. We have to realize since the lending limit has increased to the $417,000 level and then to $625,500 it has widened its scope to reach various classes of seniors.

The problem with most proprietary programs in the past were the low LTV calculations. This did put the product out of reach for those with homes of values of $700,000 or less.

Your second paragraph has a lot of merit. Yes, if you look at all the HECM loans made over the years, you are right. The HECM was designed for those that FHA help the best, the less affluent. One point you may be missing is that the lending limit increases have not been in effect for that long. When the national limit went to $417,000 this started to open up a different intellectual level of the borrower. When the $625,500 limit went into effect, this opened up the door to the more affluent. In one sense you are right when you look at all the HECM loans funded but when you look at what has taken place over the past 18 months or so, we have a different Ball game.

Sure I would like things the way they were in 2005, I am not that naive to think we can turn the Clock back. You are right, the drastic drop in home values make it imposable to return to 2005, in some way. Yes, appreciation does cover a multiple of sins, I like that.

What we can have and bring back to the industry is some of the uniformed standards of regulations and laws that everyone can live by. We have an almost panic environment in this industry today. We have legislators and committee chairman along with uninformed news casters publicly stating we are the next sub-prime industry. They are, nationally putting the fear of God into our seniors. They make us out to mongrels who are perpetrating more fraud and predatory lending on seniors than the sub-prime industry did. When it is all said and done, we have such a low percentage of complaints against Reverse Mortgages than any other product.

As far as one of the impacts of the subprime debatable zoning in on FNMA and FREDDIE's greed and leaving them holding the bag with questionable mortgages, I could not agree with you more. As far as the government taking over these agencies, it should of been done a long time ago.A great deal of the problem started 14 years ago when the sound credit standards were thrown out the window and any one was able to start borrowing. You don't think FNMA's special deals desk didn't negotiate wild commitments around the country with lenders. Then when they securitized these loans in what I call, Salt and Pepper securities, they went to a Moody's and an AIG and had securities rated way above the rating they should have. Now we had highly rated securities with insurance features on them. Look at all the securities FNMA and FREDDIE as well as Wall Street sold overseas to China, Russia and you name it. It all came back and tumbled on top of us. The same government that is supposedly trying to bring FNMA and FREDDIE back to life are the one's who helped put them their!

The Reverse Mortgage may not fit FNMA's model today because of the mess they created for themselves. At one time they wanted to dominate the Reverse Mortgage industry. It is funny that today a loan that the principle only grows over time reduces their legislated and mandated capacity. If homes start appreciating again at a decent clip, does this mean that FNMA can now change its strategy and their legislated capacity shall increase? The environment we are in today is so upside down, I don't know how we will get out of it. Their are more opinions, more solutions more fears than the markets can handle.

Yes, we sure do need other investors and quickly. I do not entirely agree with you that FNMA is acting 100% responsibly and credibly. I don't feel they are picking on seniors but the sudden moves and decisions they have made in the past have devastated many seniors around the country. Many seniors have gone into foreclosure. because of the margin increase Bomb dropped on the industry. I know FNMA had no choice but to raise margins but not the way they did it. This was done without warning. Most of the industry was taken so off guard the time alone to adjust to what FNMA did crippled many seniors around the country.

In reference to the use of TARP funds and even the MIP is a logical assumption. However, look how much of the TARP funds have been abused. Look where much of the funds have gone. Are we to think because new guide lines are being implemented with TARP funds it will cure all the problems and these funds are going to be regulated and overseen with the highest degree of scrutiny, I don't think so. James what you suggest is a good plan, maybe it would work if you had control over it. I don't disagree with your article of March 31st, it was presented very well and makes sense, if we had those that could implement and enforce.

Now what you say in your paragraph about congress permitting FNMA to buy an unlimited number of HECMs that will not impact the FNMA cap, has merit. So does the re-categorizing of HECM's in another asset class on their balance sheet. You do bring up a very valid point about if the accounting policy issued at FNMA would allow HECMs to be classified in one asset class or another.

Your last statement the major problems HERA brought to the table. Cross selling, the disaster in the reduction of the maximum origination fees and the mandate placed on FNMA. you are 100% right on this one, lets hope FNMA will be buying HECMs. However, what you said about the HECM not fitting FNMAs model any more alludes to your conclusion. We may be at the whims of the investment community and HECM originations could come to a crawl. Lets hope this does not happen. This will hurt our senior homeowner population beyond my thinking.

I will say this Mr. Veale, you are a very formidable debater, you wore me out tonight. You do have a very good handle on the problems at hand. I don't agree with you on everything you present, that is evident by my reply to you. Maybe we are both right in our own way. Have a safe Fourth and that goes to all of you reading our debate.

Mr. Veale, my best regards sir,

John A. Smaldone

While it is good you point readers to the actual Mortgagee Letter, I do not believe that my explanation results in any different amounts. Please clarify if I am wrong.

Although it should make no difference in the computation, please remember the current lending limit is $625,500 not $417,000 as shown in ML 2008-34.

Like you, I have spoken with members of Congress and leading FHA officials about this program as well as leaders in our own industry. Yes, there is no question you are right the affluent do benefit from the current lending limit in particular but the program was never designed to do that. There are several examples including back in 2005, one gentleman who owned a debt-free multimillion dollar home used a HECM to buy a car he always dreamed of.

I believe among all of the more than 500,000 homeowners who have taken out HECMs, few are attorneys living in Newport Beach in $850,000 homes. The HECM program was designed to help those that FHA helps best, the less affluent. If the predominant number of those that were helped were affluent, no doubt there would be a needs based test or some other qualifier legislated to reduce those numbers; some are suggesting, however, that needs based testing may become a reality within the next year or so.

I know you want things to be as they were in 2005 but time will not go in reverse. We need to deal with things the way they are. Why are things so different? Principally it is because we do not have the home appreciation in this country we had back then. One of my favorite sayings is: “Appreciation covered a multitude of sins.” That cannot be seen any clearer than in the subprime demise.

One of the impacts of the subprime debacle is that Fannie Mae and Freddie Mac in their greed were left holding a bag of questionable mortgages. As a result the federal government took over both of these GSEs and Congress by provisions in HERA instructed both to get rid of the bulk of the mortgages they are holding, over the next few years. HECMs do not fit the parameters Fannie Mae needs and seeks. They are the worst of all mortgages for Fannie Mae since they grow over time and thus reduce their legislated and mandated capacity. Mortgages whose balances due reduce over time through principal amortization are much more preferable.

By trying to find other investors for HECMs, Fannie Mae is acting responsibly and credibly; they are not picking on seniors. Believe me, I do not like the results but until HECMs are viewed by the investment community as a desirable investment, we will be seeing higher and higher margins over time.

As I suggested in a RMD article on March 31, 2009 there is a way to lessen the impact and that is through the use of TARP (or even MIP) funds with a slower margin ramp up for consumers but a market value for the HECM that will bring positive investor attention to new HECMs. The result would be that later HECM borrowers would be paying the difference between margins charged and the sales price of those HECMs through margins exceeding those required by investors thus providing a premium on these latter HECMs. For a full explanation, please the March 31, 2009 article.

Another way to lessen the impact on margins is to request that Congress permit Fannie Mae to buy an unlimited number of HECMs that will not impact the Fannie Mae cap. Some have also suggested that Fannie Mae could simply categorize HECMs in another asset class on their balance sheet. While their suggestion may be valid, I am not certain about the accounting policy issues at Fannie Mae that permits HECMs to be classified in one asset class or another.

While HERA brought several great changes to HECMs it also brought at least three difficult problems. The first is how to implement the unexplained cross selling rules. The second is the disastrous reduction to maximum origination fees. The final is the mandate placed on Fannie Mae. Let’s hope Fannie Mae will be buying HECMs now and in the future; otherwise, we will be subject to the whims of the investment community and HECM origination could wind down to a crawl.

I am glad to hear Reno is nice.

Actually, the example I gave of the Vegas entourage involved the putting in place of a loan for a term of years to allow for the monthly expense of 24 hour care. The tenure payments would not have worked because his monthly health care expenses are over $7,000. However, a lot of borrowers are getting the closed end fixed right now because there is so much more cash available to them after paying off their current mortgage because of the lower interest rate. (Blame Fannie Mae and higher margins on the ARMs.) Unfortunately that puts the cash in their pockets at close of escrow, and we all know how cash burns a hole in the pocket.

As you say other posts have mentioned, there are some interesting twists being developed by FHA/HUD right now that we should stay tuned for that are possible remedies, but will they be addressed any time soon? Who can possibly predict? I am still tap dancing with co op owners about when the HERA 2008 Mortgagee Letter on co ops will come out. (Blame all that housing legislation in the last year. I do.)