Fannie Mae Updates Reverse Mortgage Loan Application

image Fannie Mae (FNMA) has updated its reverse mortgage loan application (1009) and is requiring that lenders use the new form starting July 1, 2010. 

The GSE updated the 1009 to comply with Federal Housing Finance Agency (FHFA) and Federal Housing Administration (FHA) requests to capture additional data during the loan origination/application process and loan delivery.

According to FNMA, the document has been updated to support loan originator ID and loan origination company ID.  However, the updated 1009 includes additional questions which you can see at the link below.

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FNMA started supporting the new data requirements in July 2009, but lenders aren’t required to use the new 1009 until July 1, 2010 said the FAQ.

Fannie Mae Updated 1009

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  • I would especially support Item j of Section VI titled “Declarations,” if the information was required to be forwarded to counseling. If this item is simply for statistical information, it is a wasted effort.

    If Item j is there so that originators will discuss the advisability of using reverse mortgage proceeds for investment purposes, then Fannie Mae and HUD are attempting to deputize originators to be something they are not. We are not and should not become reviewers of proposed financial transactions. If that is what is expected of us then employers had better be providing the necessary education to be able to COMPETENTLY evaluate such proposals, including how to evaluate LTCi.

    There is a lot both good and bad that can be done with Item j. The most we should be expected to do with it is to ask the senior if she/he has seen an independent fee based investment advisor or other appropriate advisor and let them know this could be a good idea. There should be a sign off that we have provided this caveat on the same page of Form 1009.

  • we're basically telling the seniors and their families that we don't trust they can think on their own- I had a guy the other day stand up and walk away from the application because he didn't like how I was “coddling” him, he said “they think I don't know what I'm getting myself involved in?” all you can do is sympathize

    he finished the app but was disgusted at so much CYA

  • FROM THE DESK OF JOHN A. SMALDONE

    I am glad to see an organization like the “Assisted Senior Living” take a positive position toward Reverse Mortgages. We need all the positive publicity we can get in view of many past unjustifiable statements and media blasts.

    I agree 100% that the HECM product is safe and effective as an option for our seniors for income supplement. However, in today's economic environment we are finding more and more the Reverse Mortgage's needed to save seniors from foreclosure, getting them out of debt, resolving federal and state liens and for so much more.

    When the Reverse Mortgage came into play as a HUD/FHA controlled program the intent for the program was just for what the “Assisted Senior Living” last article stated “Supplement retirement income” and improve the quality of life for our senior's.

    We see the Reverse Mortgage being used today more for severe hardship purposes than ever in the history of the program. What we are also seeing is the the Agencies, HUD/FHA, the state legislators as well as on the federal level driving the Reverse Mortgages effectiveness out of reach from those who need it the most.

    What I am referring to is what has happened over the past year. We took a program that was very controlled and safe. It was effective for our seniors and did the job it was meant to do. Yes the markets have changed drastically and I realize we had to do something to make it a saleable product.

    The risk of a reverse mortgage has increased due to dropping home values, I could go on and on about this theory but that is for another day. Most of the risk is in the loans that were made in the past. The markets, the agencies and FHA/HUD did not think their was a problem on the horizon when home values were spiraling.Today's values we hope will some day rebound. If values continue to go down, nothing will preserve our way of life of the past. What I am saying is that now that values have dropped so and have effected the loans made in the past, future loans and seniors in need must pay the price.

    The whole point is, the actions taken by FNMA, FHA/HUD and the markets have caused havoc in the industry, put the Reverse Mortgage out of reach for many seniors who need it desperately and put the program in the same arena as the forward mortgage world is in. This has been created by bureaucrats and the same agencies that created the problem in the first place.

    The federal government through its stimulus packages and Tarp bills could have used some of these funds to subsidize the Reverse Mortgage program. This looks like it may occur according to & AP release that Obama is to halt foreclosures and fund up to $50 BILL. in subsidy money. Why did they wait so long to make the move?

    As an example: Lets say we have senior, who is a widow and partially disabled. The woman lives on a fixed income of $1,150 per month and took a mortgage on her home 5 years ago. Because of the type program she took out her payment went up after 5 years. Now our senior could no longer make her mortgage payments, her credit card debts of $35,000, utilities, food, living ETC.

    This woman and her husband owned this home for 36 years, her home is her life. She hears about the Reverse Mortgage program, however she goes to her lender and applies for a modification program. Bingo, she is obviously not a candidate and is turned down. She now goes for a Reverse Mortgage, lets say a couple of weeks ago. December 10, 2009. Her home was valued at $158,000, she has a balance on her existing loan of $142,000. The Reverse Mortgage comes in and she is $38,000 short from paying her loan balance off!

    Our choices are few, sure she could try and sell, where does she go and what does she do? Or, try and settle with the existing lender. This takes time and a lot of effort. In this case lets assume the lender would not except a 104,000 settlement, the amount of the Reverse Mortgage.

    Now we must see what has taken place over the past year to effect the amount of funds our senior would have had compared to what she has available now. Margins increased as we all know. The saving grace fixed rate product came out. The fixed rate product gave a senior the same amount they would have received on an ARM before the margins on them increased. Everyone started revving their engines up again and started moving loans into the fixed rate arena. This saved many of seniors for a while.

    Then what happened on September 23, 2009? A mortgagee letter from HUD on the lowering of the principle limit on all Reverse Mortgages by as much as 10% of the value of the home. In our seniors example, this would of meant her getting about $16,000 more, making her shortage $22,000. This may of made a difference with the existing lien holder in settling.

    The sad part of our story is that no where with all the stimulus funds allocated and the Tarp funds along with the so called foreclosure preventive funds, were their any funds allocated to subsidize our senior so she could save her home. Even if the lender came half way and funds that were appropriated for a program of this nature from the federal level came half way, a settlement surly could have been successful.

    With possible help on its way from the Federal Government, we could see major relief in negotiating settlements with lenders, utilizing the Reverse Mortgage as the negotiating vehicle. Lets hope it will not wind up into more loan modification programs where by people will have to qualify from an income and credit stand point. This would leave our seniors out in the cold, one more time.

    John A. Smaldone
    Senior Vice President
    AAXA Mortgage LLC.
    Reverse Mortgage Division

  • FROM THE DESK OF JOHN A. SMALDONE

    I am glad to see an organization like the “Assisted Senior Living” take a positive position toward Reverse Mortgages. We need all the positive publicity we can get in view of many past unjustifiable statements and media blasts.

    I agree 100% that the HECM product is safe and effective as an option for our seniors for income supplement. However, in today's economic environment we are finding more and more the Reverse Mortgage's needed to save seniors from foreclosure, getting them out of debt, resolving federal and state liens and for so much more.

    When the Reverse Mortgage came into play as a HUD/FHA controlled program the intent for the program was just for what the “Assisted Senior Living” last article stated “Supplement retirement income” and improve the quality of life for our senior's.

    We see the Reverse Mortgage being used today more for severe hardship purposes than ever in the history of the program. What we are also seeing is the the Agencies, HUD/FHA, the state legislators as well as on the federal level driving the Reverse Mortgages effectiveness out of reach from those who need it the most.

    What I am referring to is what has happened over the past year. We took a program that was very controlled and safe. It was effective for our seniors and did the job it was meant to do. Yes the markets have changed drastically and I realize we had to do something to make it a saleable product.

    The risk of a reverse mortgage has increased due to dropping home values, I could go on and on about this theory but that is for another day. Most of the risk is in the loans that were made in the past. The markets, the agencies and FHA/HUD did not think their was a problem on the horizon when home values were spiraling.Today's values we hope will some day rebound. If values continue to go down, nothing will preserve our way of life of the past. What I am saying is that now that values have dropped so and have effected the loans made in the past, future loans and seniors in need must pay the price.

    The whole point is, the actions taken by FNMA, FHA/HUD and the markets have caused havoc in the industry, put the Reverse Mortgage out of reach for many seniors who need it desperately and put the program in the same arena as the forward mortgage world is in. This has been created by bureaucrats and the same agencies that created the problem in the first place.

    The federal government through its stimulus packages and Tarp bills could have used some of these funds to subsidize the Reverse Mortgage program. This looks like it may occur according to & AP release that Obama is to halt foreclosures and fund up to $50 BILL. in subsidy money. Why did they wait so long to make the move?

    As an example: Lets say we have senior, who is a widow and partially disabled. The woman lives on a fixed income of $1,150 per month and took a mortgage on her home 5 years ago. Because of the type program she took out her payment went up after 5 years. Now our senior could no longer make her mortgage payments, her credit card debts of $35,000, utilities, food, living ETC.

    This woman and her husband owned this home for 36 years, her home is her life. She hears about the Reverse Mortgage program, however she goes to her lender and applies for a modification program. Bingo, she is obviously not a candidate and is turned down. She now goes for a Reverse Mortgage, lets say a couple of weeks ago. December 10, 2009. Her home was valued at $158,000, she has a balance on her existing loan of $142,000. The Reverse Mortgage comes in and she is $38,000 short from paying her loan balance off!

    Our choices are few, sure she could try and sell, where does she go and what does she do? Or, try and settle with the existing lender. This takes time and a lot of effort. In this case lets assume the lender would not except a 104,000 settlement, the amount of the Reverse Mortgage.

    Now we must see what has taken place over the past year to effect the amount of funds our senior would have had compared to what she has available now. Margins increased as we all know. The saving grace fixed rate product came out. The fixed rate product gave a senior the same amount they would have received on an ARM before the margins on them increased. Everyone started revving their engines up again and started moving loans into the fixed rate arena. This saved many of seniors for a while.

    Then what happened on September 23, 2009? A mortgagee letter from HUD on the lowering of the principle limit on all Reverse Mortgages by as much as 10% of the value of the home. In our seniors example, this would of meant her getting about $16,000 more, making her shortage $22,000. This may of made a difference with the existing lien holder in settling.

    The sad part of our story is that no where with all the stimulus funds allocated and the Tarp funds along with the so called foreclosure preventive funds, were their any funds allocated to subsidize our senior so she could save her home. Even if the lender came half way and funds that were appropriated for a program of this nature from the federal level came half way, a settlement surly could have been successful.

    With possible help on its way from the Federal Government, we could see major relief in negotiating settlements with lenders, utilizing the Reverse Mortgage as the negotiating vehicle. Lets hope it will not wind up into more loan modification programs where by people will have to qualify from an income and credit stand point. This would leave our seniors out in the cold, one more time.

    John A. Smaldone
    Senior Vice President
    AAXA Mortgage LLC.
    Reverse Mortgage Division

  • Seniors needing Reverse Mortgages need an effective advocate. Reverse Mortgage Specialists and loan officers need an advocate also! Who advocates for our industry and the borrower? We need to march on Washington and let our voices be heard or use the press! Why has there been NO outcry from members of AARP, Office for the Aging, or other groups aside from NRMLA? Where was OUR advocate when the regulators put forth a mortgage test with a 40% failure rate that disadvantages brokers? And with ALL banks excempt?! Now, it's gone from easy to understand GFE's for senior borrowers (which clearly disclosed YSP) to GFE's that will complicate matters even more for our senior borrowers. With the MDIA/TILA reg (while we do understand the purpose), this will delay closings. Then we have the many other changes which make for more work, more paperwork for borrowers rather than less. Do we see a picture emergeing? Crush the Reverse Mortgage industry for brokers, take it out of their hands and give it to the banks— the same banks that just about destroyed this country's banking system! We need to mobilize as an industry. If we had been EFFECTIVE with our senators and congressmen, this would not have happened. We need a real advocate now!! And it certainly is NOT AARP! I would like to reference the March 5, 2008 Reverse Mortgage Daily: “Some people, myself included, may not know that AARP has a successful business which licenses financial and health insurance products. The business is run through a for-profit subsidiary of AARP that teams up with companies which in return pay it a royalty on each sale. According to the article, these royalties can be as high as 3.7% and in 2006 these royalties contributed added up to about $400 million.” Not exactly an unbiased party when it comes to making money on seniors. As for advocates, we DO have a great advocate in Dennis Haber, see Dennis Haber.com (though he is in the business): “Besides political inspired legislation that has demagoguery as its root, certain publications are displaying an alarming lack of understanding to the redeeming features of a program that has over the years done so much good. The article that appeared in the CPA Journal (September issue)is a perfect example.” http://www.dennishaber.com/ Then, there is the lawsuit from the Mortgage Bankers Association about HUD's “Final Rule” on Respa: “HUD has failed to examine properly the Final Rule’s impact on small businesses,” NAMB president Marc Savitt said. “It will put small business mortgage professionals at a significant competitive disadvantage, impeding competition in the mortgage industry and ultimately hurting consumers. What we are looking for is a level playing field for consumers.” . . . ““Flawed testing methodology prevented HUD from adequately assessing consumer understanding of provisions in the originally Proposed Rule,” says Savitt, “Consequently, issuing the Final Rule on flawed and inaccurate conclusions. Reform of RESPA is necessary to accomplish a simplified mortgage process. But implementing provisions harmful to small businesses and consumers in doing so, is not the answer.” (Diana Golobay) http://www.housingwire.com/2008/12/22/mortgage-

    There is a Bible verse that applies here: Proverbs 15:22– “Plans go wrong for lack of advice; many advisers bring success.” This advice should have included the VERY people who work with seniors, the Reverse Mortgage Specialists and companies!!

  • rnSeniors needing Reverse Mortgages need an effective advocate. Reverse Mortgage Specialists and loan officers need an advocate also! Who advocates for our industry and the borrower? We need to march on Washington and let our voices be heard or use the press! Why has there been NO outcry from members of AARP, Office for the Aging, or other groups aside from NRMLA? Where was OUR advocate when the regulators put forth a mortgage test with a 40% failure rate that disadvantages brokers? And with ALL banks excempt?! Now, it’s gone from easy to understand GFE’s for senior borrowers (which clearly disclosed YSP) to GFE’s that will complicate matters even more for our senior borrowers. With the MDIA/TILA reg (while we do understand the purpose), this will delay closings. Then we have the many other changes which make for more work, more paperwork for borrowers rather than less. Do we see a picture emergeing? Crush the Reverse Mortgage industry for brokers, take it out of their hands and give it to the banks— the same banks that just about destroyed this country’s banking system! We need to mobilize as an industry. If we had been EFFECTIVE with our senators and congressmen, this would not have happened. We need a real advocate now!! And it certainly is NOT AARP! I would like to reference the March 5, 2008 Reverse Mortgage Daily: “Some people, myself included, may not know that AARP has a successful business which licenses financial and health insurance products. The business is run through a for-profit subsidiary of AARP that teams up with companies which in return pay it a royalty on each sale. According to the article, these royalties can be as high as 3.7% and in 2006 these royalties contributed added up to about $400 million.” Not exactly an unbiased party when it comes to making money on seniors. As for advocates, we DO have a great advocate in Dennis Haber, see Dennis Haber.com (though he is in the business): “Besides political inspired legislation that has demagoguery as its root, certain publications are displaying an alarming lack of understanding to the redeeming features of a program that has over the years done so much good. The article that appeared in the CPA Journal (September issue)is a perfect example.” http://www.dennishaber.com/ Then, there is the lawsuit from the Mortgage Bankers Association about HUD’s “Final Rule” on Respa: u201cHUD has failed to examine properly the Final Ruleu2019s impact on small businesses,u201d NAMB president Marc Savitt said. u201cIt will put small business mortgage professionals at a significant competitive disadvantage, impeding competition in the mortgage industry and ultimately hurting consumers. What we are looking for is a level playing field for consumers.u201d . . . “u201cFlawed testing methodology prevented HUD from adequately assessing consumer understanding of provisions in the originally Proposed Rule,u201d says Savitt, u201cConsequently, issuing the Final Rule on flawed and inaccurate conclusions. Reform of RESPA is necessary to accomplish a simplified mortgage process. But implementing provisions harmful to small businesses and consumers in doing so, is not the answer.u201d (Diana Golobay) http://www.housingwire.com/2008/12/22/mortgage-brokers-association-sues-hud-over-respa/rnrnThere is a Bible verse that applies here: Proverbs 15:22– “Plans go wrong for lack of advice; many advisers bring success.” This advice should have included the VERY people who work with seniors, the Reverse Mortgage Specialists and companies!!rnrn

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