I am afraid you are wrong. The calculation of proceeds is based on discounted cash flow principles and includes the ongoing MIP in those calculations. The same holds true for the tenure payment and servicing fee set aside calculations.

If you have never attempted to manually calculate principal limits without using the principal limit factors, it is a most interesting exercise. As a former math major, it is a very tedious exercise. Although I have rarely come to the exact same number, they are usually within “rounding errors.”

The critic,
I unfortunately don't have any supporting documentation as to why they will support our subsidy request. I just can't imagine they will completely kill this program because it benefits so many seniors. As we all know we are dealing with the government so nothing surprises me any more. If its not provided these changes will certainly kill the HECM no matter what changes the lenders pull to try to improve the product.

We will all be throwing in the towel if the PL is reduced 21% and the MIP is increased to 1.25%…which also reduces the PL! I would think these two combined would be absolutely terrible.

This has been the position of the Administration since the budget was first presented. I believe this is the 1% to 5% beyond the current 10% reduction discussed several times by the Commissioner.

Why is it you believe that we WILL get the $250 million subsidy? Last year, the apparent positive credit subsidy was $798 million and the Senate was willing to give us $288 million and the House none. They both passed their own version of HR 3288 reflecting those subsidies. There was a general consensus last year that if HR 3288 was reconciled, the House version would prevail.

Why do you believe the environment is any different now? There has been no significant change in the makeup in the Congress other than the super majority change in the Senate. Per Peter Bell it is the Republicans who knocked down the appropriation last time (although with their weak position, that is difficult to “reconcile”). So how are things so different now? Why wouldn't they agree to the prinicpal limits proposed, give us $0 subsidy and simply increase either the upfront or ongoing MIP higher than is being proposed?

I think we have a real reason to be concerned about the subsidy. Last year some believe we “caved” and some are concerned that our position is far worse this year over last. Please point out why you are so optimistic. Our record on subsidies is currently very poor.

The time clock is ticking for the reverse mortgage program whether the PL gets reduced or not (which it will). Interest rate increase lowers the PL and that is a sure thing. Most seniors are already upside down (to high of a mortgage) and house values aren't going to increase much in the next 10 years+.