Made as part of a last minute deal to avoid a government shutdown, the FY 2011 Continuing Appropriations Act (H.R. 1473) removes all ($88 million) funding from the agency’s counseling programs.  The cuts will have a big impact on seniors interested in reverse mortgages, since HUD guidelines require borrowers go through HECM counseling before moving forward with the loan.

“This unique counseling helps older homeowners understand the costs, benefits, and risks associated with these loans,” said Barbara Stucki, vice president for Home Equity Initiatives at National Council of Aging. “Without this funding, the older Americans who can least afford it may have to pay for this critical advice out-of-pocket.”

As a result of grants made available by HUD to counseling agencies, many seniors were able to obtain this counseling at no cost.  However, without the funding, seniors will be required to pay for the counseling out of their own funds.

As one of the eight national HECM counseling intermediaries, NCOA said the loss of the funding will also impact counselors’ ability to help reverse mortgage borrowers who are in default and at risk of foreclosure.

“In these difficult economic times, people have to increasingly tap their home equity to make ends meet,” said Stucki. “This new budget proposal is a major setback and increases the financial vulnerability of all older adults looking to use their home to stay at home.”

There are about 2,800 HUD-approved agencies throughout the country, which provide a range of services to millions of homeowners and prospective homebuyers free of charge. About half of the counseling sessions provided in 2010 were dedicated to helping those facing foreclosure, according to HUD.  A spokesperson for the agency confirmed with RMD that all counseling funding has been cut but the agency had no statement at press time.

“The de-funding of counseling is an example of the numerous items that American rely upon that are being cut in this extraordinary budget environment, yet few people really know about at this point,” said Peter Bell, president of the National Reverse Mortgage Lenders Association in an email to RMD.

“While I don’t know if it will have any impact with so many programs being cut, I would urge all reverse mortgage industry participants to call your Representative’s office TODAY and tell them that you are concerned about the adverse impact of cutting counseling funds while we’re trying to overcome a housing crisis.”

Meg Reilly, a spokeswoman for the Office of Management and Budget, told ProPublica, “these were very tough choices to make.”

Reilly pointed out that the agreement had left intact a $65 million fund devoted to counseling for foreclosure avoidance. Advocates said that fund has not come close to meeting the demand of homeowners facing foreclosure. NeighborWorks, which administers the fund, requested $113 million for 2011 but received just over half that amount.

The wholesale channels for forward and reverse mortgages will be managed separately but both will operate under the Bank of America Home Loans brand said BofA’s spokesman.

The combination of the two companies makes Bank of America the 2nd largest retail reverse mortgage originator according to data from Reverse Market Insight.  In 2009, the company endorsed 2,731 HECMs and has 9% of the total market share which is up from 5.5% in 2008.

Bank of America has over 6,100 retail banking offices throughout the US and it will be interesting to see how the company will work that into its retail reverse mortgage business.

I was surprised to find out that Bank of America hadn’t offered LIBOR products for the past few months.  The industry has shifted to LIBOR products and I think over the long run it’s the better option for everyone.  Bank of America’s LIBOR offering only allows for LIBOR 125 and 150 margin products and the pricing isn’t very aggressive.  Actually, it’s really far off compared to other lenders.

In August, former Countrywide executive Steve Boland was named as Bank of America’s reverse mortgage executive.  Boland brings over 11 years of experience with Countrywide and was their managing director and CEO of its reverse mortgage division.  At the moment the two companies are operating as separate companies but plan to be fully integrated in mid-2009.

The size of Bank of America’s branch network could be one of their advantages over others in the market.  However, they have been slow to integrate reverse mortgages into their branches across the country.  A month ago I walked into local branch here in Chicago and asked to speak with someone about reverse mortgages and it was clear they didn’t know much about the product.  I was handed off to four different people and after 45 minutes of waiting I just walked out.

I’d expect that to change soon…

Technorati Tags: Reverse Mortgage,News,Bank of America,HECM,FHA,Countrywide

Recently I spoke briefly with Terry Francisco, Bank of America’s SVP of corporate communications who said that Steve Boland was recently named reverse mortgage executive at Bank of America.  Boland spent 11 years with Countrywide and was managing director and CEO of Countrywide’s reverse mortgage division.  The two companies will continue to operate as separate companies but full integration of their sales forces and servicing centers is expected in mid-2009.

Bank of America’s entrance into the reverse mortgage business is a great example of how large institutions can buy market share very quickly.  Before buying Seattle Mortgage in June of 2007 the company had a relatively small footprint in the reverse mortgage business.

Technorati tags: Reverse Mortgage, HECM, Bank of America, Countrywide, News

While we haven’t seen the mortgagee letter from HUD regarding the elimination of the program, Countrywide is taking a proactive approach.  According to the email from Countrywide, all non-FHA approved brokers using the advisor program had to get their applications in by last Friday at 8:00 PM… at least they gave everyone a few hours notice.

While I’m not sure how much of Countrywide’s reverse mortgage production came from the advisor program, I know they were heavily marketing it to their “forward” wholesale clients.  I would expect formal announcements from other lenders in the next couple weeks.

Technorati Tags: Reverse Mortgage,HECM,Countrywide,Broker Advisor Program,FHA,News

NRMLA recently issued a clarification to help give the industry additional insights and reminders around the Mortgagee letter.  Below is an overview of the letter from NRMLA:

First, the Mortgagee Letter states that only “non-FHA approved” brokers may serve as advisors. This letter states formally that FHA policy permits a non-approved entity or third party to assist in the origination of insured loans in certain limited ways, and to receive compensation for such services actually provided under certain limited circumstances.

Second, the Mortgagee Letter outlines those activities that can only be preformed by an FHA- approved entity (i.e., not an “Advisor”):

• Taking information from the borrower and filling out the loan application
• Analyzing the perspective borrower’s eligibility for a reverse mortgage
• Collecting financial information, if applicable, and other related documents that are part of the application process
• Initiating/ordering verification of deposits or assets if applicable
• Initiating/ordering requests for mortgage and other loan verifications
• Initiating/ordering appraisals
• Initiating/ordering inspections or engineering reports
• Providing disclosures (truth in lending, good faith estimate, others) to the borrower
• Assisting the borrower in understanding and resolving adverse property conditions
• Ordering legal documents
• Determining whether the property is located in a flood zone or ordering such service and
• Participating in the loan closing

Third, the Mortgagee Letter outlines those activities that “Advisors” may undertake, and the conditions and compensation guidelines:

• Educational – type originator services
• The advisor or independent third party (non FHA approved) must be engaged independently by the homeowner
• There must be no financial interest between the mortgage broker and the mortgagee
• The fee paid to the Advisor must be included as part of (and subtracted from) the origination fee
• The Advisor may not be compensated for simply referring the loan application to FHA approved entities
• The Advisor may not perform the origination activities that must be performed by the FHA approved originator (as outlined above)
• Advisor services may include compensation for advising on different loan products, demonstrating various closing cost options and payment options, maintaining contact with the lender to keep the borrower apprised of the status of the application.

Fourth, the Mortgagee Letter reminds the industry of RESPA Statement of Policy 1999-1 which addresses the amount of compensation a mortgage broker may receive for such services:

• The Advisor provides actual services and not just a referral
• The services are meaningful and do not constitute steering or merely delivering a loan with a higher rate (per RESPA definitions)
• The compensation is paid from the borrower directly from the borrower’s own available assets or from HECM proceeds
• The amount paid is no more than the reasonable value for such services
• The final HUD-1 settlement Statement contains the amount paid and the name of the mortgage broker
• The signed written agreement between the borrower and the Advisor, describing the advisory and educational services to be performed and the amount of compensation for each service, is included in the FHA case binder.

Fifth, other regulators, also charged with reviewing RESPA compliance, including for example the FDIC and NCUA and state regulators, may have expressed views about the HECM Advisor program, and their views also need to be considered by NRMLA Members regulated by them.

Mortgagee Letter 2008-14

Technorati tags: Reverse Mortgage, News, HECM, FHA, NRMLA, HUD, Countrywide, Mortgage

Many loan originators have begun having to originate two reverse mortgages at the time of application never knowing if one lender will keep their product in the market place versus the other. With a number of wholesalers reselling the same proprietary product on Wall Street, originators and borrowers are limited in their choices for these products. It doesn’t seem reassuring to a senior to hear that since you don’t know if a product will be around thirty days later they better sign two sets of documents just in case….kind of scary. Being prudent in this case may make a senior more nervous about their reverse mortgage, the housing market, and Wall Street lenders. Hopefully, we won’t be ordering a triple.

Here are the jumbos that I know of which are still available (these are wholesale states only):

• Gold Reverse Jumbo – Available in CA, FL, WA, NV 
• LLS Equity Plus Advantage – Available in AL, AZ, CA, CO, CT, DC, FL, IL, LA, ME, MD, MI, MS, MO, NJ, NM, NC, NV, OH, OR, PA, SC, TC, VA, and WA.
• EverBank Reverse Select – Available in AZ, CA, CO, CT, DC, DE, FL, GA, HI, ID, IL, IN, MD, NV, NH, NJ, NY, OH, OR, PA, RI, SC, TX, UT, VA, and WA.
• 1st Reverse Fixed 4 Life – Available in AZ, CA, CO, CT, DC, DE, FL, GA, HI, ID, IL, IN, MD, NV, NH, NJ, NY, OH, OR, PA, RI, SC, TX, UT, VA, and WA.

What about the Cash Account?  Not sure, I’m hearing it’s being pulled but all of my former contacts at Financial Freedom no longer work there and the other contacts I have wont respond to me… including their PR company and Executives… so I’m thinking it might be true.

Countrywide Simple Equity is apparently dead too… no one from CW wants to talk to me when they are pulling products

I did get confirmation from Bank of America that the Independence plan is suspended but there other proprietary products are still active… once I get more information on them I will be sure to post about it.

1. Countrywide will no longer be paying any back end premiums on HECM or Simple Equity products.
2. Countrywide is adjusting their sales coverage model.  The new model will be a centralized team of reverse mortgage specialists who will work with their nationwide “forward” account executives to handle both service and support for your reverse mortgage production. 

I’m not totally sold on the idea that a “forward” account executive can handle reverse mortgage business along with their normal business.  I know that Wells Fargo is operating their reverse mortgage business the same way with current wholesale clients, but I haven’t heard much about anyone using Wells for their reverse mortgage production. 

I wish everyone who was laid off best wishes in their next move and I’m sure everyone will land on their feet.

Technorati tags: Reverse Mortgage, Reverse Mortgage News, Countrywide, HECM, Simple Equity, Wells Fargo