The problem is, the budgetary process is not open to debate. It is what it is.

You are also only looking at fixed rate HECMs. Bankers may not adjust as you propose. Adjustable expected interest rates could fall that low and again monthly adjusting rate HECMs become the dominant product. Note interest could take off on 6/30/2011, causing even greater problems for the program.

There are several other risks such as appreciation rates actually being less than that selected by the Administration. If that were to happen, the program would be experiencing more losses than anticipate.

In fact seniors are generally living longer than the mortality tables used in creating the PLFs indicate.

Your assumptions are just that and do not address existing standards. While your assumptions may ultimately turn out to be more accurate, to get the necessary parties and actuaries to buy off on them is not a simple task. It would require substantial evidence indicating the accuracy of your assumptions over theirs. Good luck on that front.

It would reduce the $798M risk because if the loans are compounding at .25% less in interest over the given period of time then the overall risk would be reduced because the only way to really have risk on a Reverse Mortgage is if the people really live a long time. If that is the case then the .25% compounded interest rate becomes even more of a factor the further you go out in time.

We won't discuss how much banks are paying back on these Loans, but i will say that it's increasing. The reason is that if the general GNMA falls to where forwards are below 5% (which they have recently) then the Lenders are probably making close to 4 points+ on the back when they are selling these pools. They have started to pass some of that on to us, but certainly not a proportiate share because they don't want people to know exactly how much money they are making on these loans.

I would guarantee that there would be room to move the rates down to 5.31% and you could even get some lower than that, and the Lenders would still be making out like bandits.

Even if the PLFs were expanded to include lower interest rates, the current expected interest rates are equal to or above the 5.56% floor right now. Further the reason for the positive credit subsidy is based on risk. Returning the proceeds to the prior levels only returns the risk and subsidy to their prior levels.

As to Prsident Jimmy Carter, his Administration eneded over eight years before the first HECM was originated.

I like your goals. Keep up the good work.

I'm not sure why they would of ever created a floor rate in the first place. Surely it was some person that just got lazy back in the Carter days and decided that rates would never get this low. You can't tell me it was to encourage investing from outside sources. You are looking at a sub 65% LTV loan that is guaranteed by FHA/HUD to pay out at 5.56% + $25-35 a month. I'm thinking that's pretty amazing in this market.

But that is just my 2 cents. I sent something like this to NRMLA right as the change was being made. But it obviously didn't get any steam. The problem is that the Banks and many Originators would never back an idea like this because it would cut into their profits. But there are always those customers you would like to help that are just outside of being able to be helped and they have taken away a lot of options. Sometimes volume makes up for profitability?

I appreciate your kind comments and even more your openness and honesty. It is genuinely refreshing. Mr. Tiffan is fortunate to have you as a close colleague. Like you I am just beginning to understand the real significance of the change in categories for HECMs within the HUD budget.

Mr. Abel Torres did a great job in attempting to tackle the subject of the change in budgetary categories in some comments to a May 7, 2009 article in RMD. While I believe he would revise and improve some of those comments, they are definitely worth rereading. While I have a different take on the matter, Mr. Torres is very knowledgeable on the subject and his comments are insightful.

After reading that article, and another one here by Jim (who obviously knows more than most of us (Cynic included)) hat is going on:

http://reversemortgagedaily.com/2009/10/07/reve…

though it would seem that a change in Classification of the Insurance from “General” to “Mutual” would be a cluprit,as is pointed out, and that this would generally be to cause to blame in the case of the Principal Limit Reductions? I have read other Articles on this (however I'm unable to find them at this time) and it generally also blames this switch on the problem. Perhaps another Article by Jim to explain the 2 different Funds would be appropriate and welcomed since anything that takes HECM's from being on their own, to a reclasification, to losing money, to a reduction in Principal Limit's would indicate that it's being affected by the drop in the values of homes and FHA/HUD losing money on the rest of the loans they are insuring?

I will continue to look for those other articles as well.