What a disappointment!!! I guess several significant leaders in this industry just don't get it.

The Truth-in-Lending rules REQUIRE that when one is saying that their product saves over $67,000 in comparison to some unnamed mortgage, at a minimum, there needs to be enough information provided so that the comparison can be verified. This is clearly a false claim when compared to the Financial Freedom 5.39% fixed rate HECM product which was announed by RMD on the 4th of this month. MetLife has at least two different fixed rates. What standard fixed rate is Living Well referring to?

John Lunde is correct to question the reasonableness of the length of the loan (which seems to violate at least the spirit of TILA). These incomplete and inappropriate examples once again make our industry look like we do not realize that we actually are part of the mortgage industry and need to be careful not to promote our products inappropriately. We must avoid the subprime and Alt-A image at all costs; this announcement is not a great example from an industry which already has an image barrier to overcome.

You would think the NMLS exam and related course prep would have made us more aware of and sensitive to our responsibilities but even the Financial Freedom RMD announcement was somewhat suspect. We must be careful and avoid the advertising ploys that were used in the subprime era and were filled with inaccuracies and hype. It would have been so easy to have made this announcement right, responsibly, and full of good news. Living Well chose another way.

We can do better, much better —- AND we must!!!!

Live Well Financial appreciates contributor feedback but nonetheless is surprised by some of the negative comments to a product offering that we consider a substantial improvement for senior homeowners in an environment with both significant short-term and long-term interest rate risk.

In February, 98% of Wholesale HECM fixed rate endorsements has an interest rate of 5.56% or higher. We compared that “industry standard” product against our new 4.99% fixed rate.

We understand the comments regarding longevity but disagree with indications that this product is not compelling or that the information is inaccurate. Most people are unaware that a significant number of reverse mortgage customers refinanced out of their reverse mortgages into subprime cash out refinances during the early part of this decade. This worked to reduce HECM loan lives significantly. It goes without saying that this was a terrible decision for these seniors as they are now losing their homes to foreclosure in record numbers because they cannot afford the payments on their subprime loans. With no subprime cash out refinances available to seniors anymore (thank goodness), increased longevity, and earlier expected adoption of reverse mortgages by baby boomers, we expect materially longer loan lives than what has been seen in the past. We are already seeing evidence of this increased loan life with the HECM loans we service.

We have included additional projections for our 70-year-old borrower and a 62-year-old baby boomer.

HECM ($300K MCA; Closing Costs (excl. MIP) = 3% of MCA; $0 MSF; 100% Cash Draw)

By Age: Principal Balance After X Years

Borrower Age 62
4.99% 5.56% Savings
5 $221,717 $228,095 $6,378
10 $281,569 $308,587 $17,018
15 $383,427 $417,482 $34,055
20 $556,263 $623,093 $60,578
25 $663,082 $764,113 $101,031

Borrower Age 70
4.99% 5.56% Savings
5 $244,599 $251,636 $7,037
10 $321,659 $340,434 $18,775
15 $422,998 $460,567 $37,569
20 $556,263 $623,093 $66,830
25 $731,514 $842,972 $111,458

For certain types of borrowers, HECM loan lives could in some circumstances surpass 25 years. We certainly don’t expect all customers to be in their HECMs for this long, or even the average customer’s loan to last that long. However, there are many seniors who do expect that type of longevity (plus HUD requires that information on HECM amortization schedules). These are the seniors who we hope the 4.99% product will bring into the market for consideration of the HECM program. For these baby boomers, the 4.99% interest rate product has significant savings. The math speaks for itself and only time will dictate whether or not it helps our industry.

It is oLive Well Financial appreciates contributor feedback but nonetheless is surprised by some of the negative comments to a product offering that we consider a substantial improvement for senior homeowners in an environment with both significant short-term and long-term interest rate risk.

In February, 98% of Wholesale HECM fixed rate endorsements has an interest rate of 5.56% or higher. We compared that “industry standard” product against our new 4.99% fixed rate.

We understand the comments regarding longevity but disagree with indications that this product is not compelling or that the information is inaccurate. Most people are unaware that a significant number of reverse mortgage customers refinanced out of their reverse mortgages into subprime cash out refinances during the early part of this decade. This worked to reduce HECM loan lives significantly. It goes without saying that this was a terrible decision for these seniors as they are now losing their homes to foreclosure in record numbers because they cannot afford the payments on their subprime loans. With no subprime cash out refinances available to seniors anymore (thank goodness), increased longevity, and earlier expected adoption of reverse mortgages by baby boomers, we expect materially longer loan lives than what has been seen in the past. We are already seeing evidence of this increased loan life with the HECM loans we currently service.

To provide additional numerical scenarios, we have included additional projections for our 70-year-old borrower and a 62-year-old baby boomer.

HECM ($300K MCA; Closing Costs (excl. MIP) =3% of MCA; $0 MSF; 100% Cash Draw)

By Age: Principal Balance After X Years

Borrower Age 62
4.99% 5.56% Savings
5 $221,717 $228,095 $6,378
10 $281,569 $308,587 $17,018
15 $383,427 $417,482 $34,055
20 $556,263 $623,093 $60,578
25 $663,082 $764,113 $101,031

Borrower Age 70
4.99% 5.56% Savings
5 $244,599 $251,636 $7,037
10 $321,659 $340,434 $18,775
15 $422,998 $460,567 $37,569
20 $556,263 $623,093 $66,830
25 $731,514 $842,972 $111,458

For certain types of borrowers, HECM loan lives could in some circumstances surpass 25 years. We certainly don’t expect all customers to be in their HECMs for this long, or even the average customer’s loan to last that long. However, there are many seniors who do expect that type of longevity (plus HUD requires that information on HECM amortization schedules). These are the seniors who we hope the 4.99% product will bring into the market for consideration of the HECM program. For these baby boomers, the 4.99% interest rate product has significant savings. The math speaks for itself and only time will dictate whether or not it helps our industry. It is our intent to help this industry, by continuing to bring products like this to the market to increase the benefits and reduce the costs for seniors and their families.

Our intention to help this industry, by continuing to bring products like this to the market to increase the benefits and reduce the costs for seniors and their families.

Point taken, but the savings of <4% over the typical 7-year period falls within my definition of “nominal” when making a decision on the selection of a HECM program/lender.

It is good to see this response. It verifies what criticisms were made but at the same strongly asserts why those criticisms were not relevant to the considerations of Live Well management.

However, the only significant issues related to the present HECM fixed rate product as to the ultimate balance due are 1) the principal limit at time of funding, 2) the monthly servicing fee amount, 3) the note rate, and 4) the length of the loan. All other information is superfluous.

All in all, a very good response. We appreciate your clarification.

It is good to see this response. It verifies what criticisms were made but at the same strongly asserts why those criticisms were not relevant to the considerations of Live Well management.rnrnHowever, the only significant issues related to the present HECM fixed rate product as to the ultimate balance due are 1) the principal limit at time of funding, 2) the monthly servicing fee amount, 3) the note rate, and 4) the length of the loan. All other information is superfluous.rnrnAll in all, a very good response. We appreciate your clarification.rn