Comments on: HUD Lowers Principal Limit Factors for FHA Reverse Mortgage Program

By: Anonymous

Anonymous — Tue, 29 Sep 2009 07:58:00 +0000

You are correct but it only amplifies the importance of Ginnie Mae as an alternative source. What is true for individual firms is a micro picture. On a macro level, things are much different.

By: The_Cynic

The_Cynic — Tue, 29 Sep 2009 05:58:40 +0000

You are correct but it only amplifies the importance of Ginnie Mae as an alternative source. What is true for individual firms is a micro picture. On a macro level, things are much different.

By: dduck12

dduck12 — Fri, 25 Sep 2009 11:52:41 +0000

lindenlee
If your facts are correct about the allocation of the MIP to cover forward mortgage losses, then previous administrations and regulators were remiss in protecting seniors. The current tone in government may not be anti-senior although it sure seems that way. My theory is that the amount of the subsidy and the concerns of seniors re: RMs and medicare are so small that they are hidden by the “big” subsidies/bailouts/reforms/union concerns, etc. It seems easier to overlook the “small” problems- when your heads (administration and congress) are high up in the sky, it is hard to see the worker ants below.

By: ReverseGuy

ReverseGuy — Fri, 25 Sep 2009 10:19:25 +0000

Cynic,

Yes GNMA is an option – but let's be real about it. There are only a very few, select lenders in this industry that have the balance sheet capable of pulling off a GNMA. The additional risk, cost, and overall structure of a HMBS securitization do not create a viable option for most lenders in the business.

By: lindenlee

lindenlee — Fri, 25 Sep 2009 00:54:05 +0000

Maybe I misunderstand the way that FHA uses the premiums for reverse, but hasn't it used those surpluses on the HECM side for years to offset losses on the forward side? So haven't the seniors in reality been subsidizing the young people all this time? Don't those surpluses that the HECM provided for years count for anything in this one year where a subsidy is needed? We can't afford $700+ million when our crazy gov't is going into debt this year for $1.5 TRILLION?!

I could never understand why the claim history of the program wasn't examined over the years to see if FHA could reduce the premiums to reflect the claim costs to the program, as FHA did for the forward side. Shouldn't each side pay its own fair share? Shouldn't the seniors get a break when the claims are small, and have their premiums reduced?

I see in this just another way that the very government that says it cares about seniors actually discriminates against them, and sees them as just another revenue source that can be exploited in the good years, and cut off at the knees in the bad years. They should be ashamed of themselves.

But hey, The One is about the cut off their Medicare to the tune of $500B, so what a few more cuts to their HECM benefits, right. Those seniors are, after all, "useless eaters". Disgusting.

By: The_Cynic

The_Cynic — Thu, 24 Sep 2009 22:31:23 +0000

Hey Matt,

Don't expect MIP to change. Right now that is a dream and even if it did it might not affect the current PLF adjustments.

The PLF reductions are not permanent. They could end within days from starting, IF Congress provides a subsidy (a Pollyanna type wish) or it could be lowered IF Congress provides a partial subsidy (Pollyanna's more pessimistic sister's). We'll see.

This PLF adjustment will end on 9/30/2010 no matter what. However, if there is another loss projected for the following fiscal year (a real possibility), the PL factors could be adjusted again.

In the last sentence you are tying factual matters to projections. If the appropriations act is passed with no HECM subsidy, the only way the principal limit factors will return to what their levels were before 10/1/2009 is if Congress and the President amended the subsidy amount based on higher expected home appreciation rates-- very highly unlikely or in Conference Committee next month a full or partial subsidy is provided. However, if there is no loss projected for the fiscal year ending 9/30/2011, the PLF levels applicable before 10/1/2009 should go back into full force on 10/1/2010.

By: The_Cynic

The_Cynic — Thu, 24 Sep 2009 21:12:08 +0000

If the lending limit returns to $417,000 on January 1, 2010 combined with this 10% reduction, a senior who just turned 63 with a home appraised between $635,000 and $640,000 on both September 30, 2009 and January 1, 2010, will only be eligible for 60% of the principal limit on January 1, 2010 that the senior could have received on September 30, 2009 if a FHA Case Number was in place on date. That is a 40% drop. What a drop in not much more than 3 months!!!

By: The_Cynic

The_Cynic — Thu, 24 Sep 2009 20:49:24 +0000

Mr. Torres,

I thought one of the benefits of a HECM mini, light, or whatever was lower MIP. The MIP in case is not lower.

As your comment 6), it is worse. The cost per dollar of proceeds just went substantially up.