HECM_Dude,rnrnThx.

Critic:nnSince you refuse to understand, I’m going to allow you to have the last word.

As to your concept of SS taxation, it is nonsense in my eyes. Income tax is charged on the employees’ portion but not the employers’ portion. Not all employees and not all self-employed pay SS taxes.rnrnI find your attack on the HECM financial model unwarranted and without merit. For those who understand it, it is transparent and relatively easy to use. For those with little math training, it is difficult if not impossible. But I believe that the underlying assumptions should be reveiwed for relevance annually.

One more time for those who don’t (or refuse to) get it: Social Security tax is the same tax, whether it is paid by the employer or the employee. It is part of the cost of doing business. And more is currently being paid out in benefits and is projected to be paid out in benefits in the future than the total amount of tax being paid by all employers and employees, including the self-employed. This fact is not in dispute among those, both on the left and on the right, who are knowledgeable on the subject. What remains to be resolved is how to reform Social Security Security, Medicare and other entitlements.nnThe HECM calculation model is deeply flawed and should be scrapped, in my opinion. The recent haircut and the one to come are making it worse. I’d like to see it replaced with something that is more transparent and easier for originators to explain and consumers to understand.

HECM_Dude,rnrnWas it you, the disguised economist, who made this statement: “The average Social Security or Medicare recipient receives far more in benefits than he or she pays in (around three times as much).” And ” The fact remains that in the aggregate far more benefits are paid out to current beneficiaries than they paid in.”rnrnAnd this is your response to showing how twice as much is paid into SS than what you indicated in the first sentence above? Some of us were math majors and still have trouble trying to understand what you, econ majors, are saying. Your income information is a little weak since the employers’ half of SS is not considered income by anyone including the IRS. rnrnIt is easy to understand why things have changed when you realize that the category in which HECMs are found in the budget switched from GI to MMI due to HERA. Too many of us are like the voters you describe; we were asleep at the switch or so happy with the positive aspects of HERA we missed its most negative aspect. Without the HERA switch, the actions of this Administration would be meaningless.rnrnI respectfully disagree. If the FHA HECM financial model is reasonably accurate and there will be swings in home values, how can you argue that this Administration has acted responsibly? If you believe that, then the HECM financial model must be scrapped and completely overhauled. Like most economists, you want it both ways.rnrnrn

Hey Mr. President,rnrnMaybe you can invite me over for a beer in the Rose Garden with that person in your Administration who is causing so much trouble for the HECM program. While you are at it, I can think of a few employees at FHA who would also love to meet this person so that we can “help” straighten this person out. Thanks for identifying yourself.

I should be well-versed — my degree is in economics. As a business owner, I am also extremely well-informed as to how Social Security and Medicare taxes are distributed between the employer and employee.nnRegarding the employer paying half and the employee paying half of the Social Security and Medicare taxes — it doesn’t matter who pays them. The employer could pay all of it or the employee could pay it all. No matter how it’s set up (self-employed persons pay both “halves” via self-employment tax), it’s part of the employer’s total employee expense, and it’s constructively part of the employee’s total income. nnBy 2030, we are projected to have four workers supporting each Social Security/Medicare beneficiary. Everyone wants to enjoy the benefits, but no one wants to pay their true cost. The important thing to understand is that without meaningful reform, deficit spending on entitlements ultimately will cripple our economy. We, through our political system, must make difficult choices now, or our children and grandchildren will have no choices left to make in the future. Unfortunately, our voters (of any political persuasion) are not disposed toward rewarding their elected officials for doing what is truly necessary; therefore, I am not optimistic that the reform we need will happen before it becomes a major crisis.nn nThe assumptions that were used to create the HECM calculation formula were based on historical home appreciation rates dating to 1900 as well as mortality tables that existed 20 years ago. The use of an expected rate that varies from week to week (in the case of adjustable-rate HECMs) is a serious flaw, in my opinion. This was partially addressed by implementing the 5.5 percent floor. Unfortunately, it made the program more complex than it needs to be, and it forced originators to “game” the closing date in order to give the maximum principal limit to the borrower. nnOne cannot predict the future with absolute certainty, and some of those assumptions have not worked out, at least recently. When Congress passed the legislation that created the HECM program, it was never anticipated that a subsidy would be required. HUD/FHA is charged with managing the program so as to keep it revenue-neutral. The Administration was only recognizing reality in in using a lower appreciation rate in its budget projections. I believe it acted responsibly on behalf of the taxpayers.

I should be well-versed — my degree is in economics. As a business owner, I am also extremely well-informed as to how Social Security and Medicare taxes are distributed between the employer and employee.nnRegarding the employer paying half and the employee paying half of the Social Security and Medicare taxes — it doesn’t matter who pays them. The employer could pay all of it or the employee could pay it all. No matter how it’s set up (self-employed persons pay both “halves” via self-employment tax), it’s part of the employer’s total employee expense, and it’s constructively part of the employee’s total income. nnBy 2030, we are projected to have four workers supporting each Social Security/Medicare beneficiary. Everyone wants to enjoy the benefits, but no one wants to pay their true cost. The important thing to understand is that without meaningful reform, deficit spending on entitlements ultimately will cripple our economy. We, through our political system, must make difficult choices now, or our children and grandchildren will have no choices left to make in the future. Unfortunately, our voters (of any political persuasion) are not disposed toward rewarding their elected officials for doing what is truly necessary; therefore, I am not optimistic that the reform we need will happen before it becomes a major crisis.nn nThe assumptions that were used to create the HECM calculation formula were based on historical home appreciation rates dating to 1900 as well as mortality tables that existed 20 years ago. The use of an expected rate that varies from week to week (in the case of adjustable-rate HECMs) is a serious flaw, in my opinion. This was partially addressed by implementing the 5.5 percent floor. Unfortunately, it made the program more complex than it needs to be, and it forced originators to “game” the closing date in order to give the maximum principal limit to the borrower. nnOne cannot predict the future with absolute certainty, and some of those assumptions have not worked out, at least recently. When Congress passed the legislation that created the HECM program, it was never anticipated that a subsidy would be required. HUD/FHA is charged with managing the program so as to keep it revenue-neutral. The Administration was only recognizing reality in in using a lower appreciation rate in its budget projections. I believe it acted responsibly on behalf of the taxpayers.

I am Obama and I control everything!!rnBy the way I don’t like some of the things you have been saying about me : )rnDon’t forget not only a 5-7% decrease but MIP increase which will lower tremendously the funds available to seniors. I can take the additional 5-7% but the increase in MIP is going to hurt…BAD!

Unfortunatlely I agree with everything you have said Sleepless in Saratoga. I am in your boat and many are happy we will leave in hopes of reaping the benefits of less sales reps. Although, when you have a product that is geared toward “a loan of last resort” you will also have less seniors doing the loan. Most loans I have done of the past 8 years have been for improving their life style not because they have no other choice. Good luck everyone…you are going to need with home values and interest rates. If you have the ability run numbers for a senior assuming interest rates are 2%-3% higher you will be depressed how much they will then qualify for.

I thought the video was entertaining, but it wasn’t correct. The FDIC even published a statement regarding why it was incorrect.nnhttp://www.fdic.gov/news/news/press/2010/onewest_lossshare.html

I saw the TBWS video and I think it is indicative of a lot of problems with the “bailouts”

Very interesting discussion. One of the central problems is the valuation of homes. I would suggest you look at the attached video, where the FDIC gives incentives to One West Bank, the successor to Financial Freedom to encourage short sales and foreclosures, instead of loan mods. As long as this type of arrangement is perpetuated we will be in a continuing downward spiral of housing values. Please watch:http://www.thinkbigworksmall.com/mypage/player/tbws/23622/1158084nThanks,nreversemortgagessouthfloridaFHAhudn

Very interesting discussion. One of the central problems is the valuation of homes. I would suggest you look at the attached video, where the FDIC gives incentives to One West Bank, the successor to Financial Freedom to encourage short sales and foreclosures, instead of loan mods. As long as this type of arrangement is perpetuated we will be in a continuing downward spiral of housing values. Please watch:http://www.thinkbigworksmall.com/mypage/player/tbws/23622/1158084nThanks,nreversemortgagessouthfloridaFHAhudn

HECM_Dude,rnrnYou obviously are extremely well versed in SS economics except for the fact that employees only pay in 1/2 of the total; employers pay in the other half. Employees should be receiving 2 times the amount they pay in. Now if reasonable earnings are added to that, three times would still mean SS should be profitable. The problem is, SS was forced to purchase government securities which historically did not keep up with inflation.rnrnSo let’s play out your theories. HUD has done absolutely nothing to change the program. If it initiated any changes, please point them out. The facts are HERA chnaged the category of HECMs within the Budget, the Administration required that lower appreciation rates be used in their budget projections, and Congress refused to fund the resulting positive credit subsidy. HUD did not want any of that to occur.

2545,rnrnPlease cite your source. So far all explanations have been sketchy at best.rnrnThanks.

Despite the nightmare created by the CDS’s, the reason I remain optimistic about the program is that given what is likely to happen to Soc. Sec. and Medicare combined with the fact that some 80% of baby boomers have not adequately planned for retirement means that the government is looking down the barrel of a loaded gun. Much better to allow people reasonable access to their primary asset and use their own money wherever they can find it, to fund retirement. Of course, this isn’t going to be helped by raising MIPs/reducing principal limits and making the product even less attractive. rn2545′s estimate of a 5-7% hit is pretty on target. It’s not getting easier that’s for sure.rn

Anybody can find anecdotes about this person or that who (along with his or her employer) paid far more into the system than they drew out. I had a friend who passed away at the age of 50; therefore he never drew a penny. The fact remains that in the aggregate far more benefits are paid out to current beneficiaries than they paid in. nnWhen Social Security was begun, the average life expectancy of the American worker was only 65, and the system was well-funded. Today, mostly because payments into the system have not kept up with changes in life expectancy and benefit increases, we face massive deficits as a result. Privatization is not a realistic option, from an economic or political standpoint. Therefore, meaningful reform means attacking everyone’s sacred cow: benefits must be cut, and taxes will need to be increased. The sad reality is nothing will be done until it is too late and we have a crisis because everything that must be done is unpopular.nnHow does this relate to HECMs? We have the argument that when we take the longer view, the FHA insurance fund will have sufficient profit years to offset the negative years. Perhaps. But the HECM program has been here only 20 years; during most of that time it grew exponentially, culminating it a massive number of endorsements during those years when home values reached their peak level. nnToday, many homeowners who took out HECM loans only three or four years ago already owe more on their homes than they are worth. Home values have stabilized only in some markets; in others, including those most affected by the housing crisis, some economists predict a second housing downturn. It is not difficult to understand the actions being taken by HUD/FHA to deal with this.

HECM_Dude,rnrnWhat you are missing is that some pay far more into SS and Medicare than they will ever receive. As an employer I paid far in excess of $25K per year for 20 years just into Medicare in behalf of my employees. If that money had been put into conservative annuities who much would those annuities be worth today several years after I left that business?rnrnOn the other hand my great grandfather paid less than $10,000 into Social Security before he retired. He lived until he was in his late 90′s. He died in the mid eighties. He received far more from SS than he ever paid in.rnrnI also had a friend who passed away two years ago and he received nothing out of it. So while your point is well taken, there are exceptions to almost every rule.rnrnThe problem that many in this field do not see is that HECM MIP is based on the program being here for many, many decades. It will always have endorsement years, where losses will exceed the MIP that cohort of HECMs generate — but in most years, there will be profits which offset those losses. That is what is commonly called the long-term view of the program and its financial model.

5%-7%

5%-7%

Elio,rnrnWhat does the amount of existing debt have to do with the HECM program? If a senior with no debt on the property takes out a fixed rate HECM, how is the risk any different for a senior who has a mortgage with a LTV of 40% (or even 80%) and also takes out a fixed rate HECM? In both cases the risk to HUD is focused on the value of the home at the end of the loan versus the balance due on the HECM at that time.rnrnThe only place your argument makes some sense is if you simply look at adjustable rate HECMs but even then if seniors see their home values plummeting, why wouldn’t they take out all of the available proceeds? When home values are rising, the risk can be different but not always. rnrnI agree with those who see room for two categories of HECMs. It is hard to believe that there will not be a demand for the current HECM program for years to come. However, there is a need for HECM II as well. It would provide lower proceeds but it would also require much lower upfront MIP. With fixed rate HECMs, HECM II (or perhaps HECM III) would let seniors decide how much they need and would only provide that amount.rnrnIf seniors choose a lower principal limit on their HECMs II than is available, why couldnu2019t the lowered upfront MIP be lowered yet further? In other words, if the requested principal limit is 70% of the maximum available, why couldnu2019t the lowered MIP be reduced by say 20%? Then if seniors later decided to up the principal limit to the maximum, the MIP calculation would be the same as it is now with a HECM-to-HECM refinance with maybe a $500 additional refinance fee.rnrnMaybe I am misreading your idea. If so, please provide more information. rn

Yeah, like NRMLA has lots of clout on the Hill or at the White House…

So, does anyone know how much a haircut we can expect for the principal limit when all is said and done this time? Like to hear the thoughts of those in the know…

So, does anyone know how much a haircut we can expect for the principal limit when all is said and done this time? Like to hear the thoughts of those in the know…