New Tax Credit Not Impacting HECM for Purchases Says Lenders

Despite the New Homebuyer’s Tax credit being available to reverse mortgage borrowers, several lenders tell RMD that it has yet to have an effect on their HECM for purchase business. 

Derry Hampton, a reverse mortgage professional with Security 1 Lending told RMD it has not been effective in the reverse mortgage industry because, “the senior homebuyer isn’t looking so much for a first-time tax credit.  They’re looking more to get settled for the rest of their life and get settled in a better manner.”

As such, a senior who has not owned a home is unlikely to choose to purchase a new one. If they do choose to do so, a tax credit is unlikely to be their motivation.

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But Monte Howard, Affinity Relationship Director at Generation Mortgage Company Howard disagrees. He thinks that the tax credit for homeowners seeking to trade up is, “a pretty compelling story.” Howard called the tax credits “something worth talking about because it will get people’s attention.”

But he noted that while some people are talking about the tax credits, no one’s banking their marketing on it. He counters that the tax credit gets people’s attention and may be a good way to get realtors to stop and listen.

Write to Reva Minkoff

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  • The home buying services needed for the senior population is hardly proportionate to its size. Many seniors will never own a different home. A much higher percentage of younger families are looking for different housing to purchase than those past 69 years old. So is it really surprising that the industry has not dedicated substantial resources in marketing a tax credit that is scheduled to terminate in a few months?

    The tax credits are designed to stimulate home sales by pushing two groups into the market, those sitting on the fence and those on the cusp of being able to afford to buy a home. Once the credits terminate, it is felt that their termination will have a similar impact on home sales as the termination of the cash for clunkers program did on auto sales; sales will fall dramatically for awhile.

    With HECM proceeds hacked, no one expects an increased national demand for reverse mortgages in 2010 except for perhaps the last quarter of the calendar year but only IF principal limits are restored to prior levels for the fiscal year ending September 30, 2011. In response to FHA reserve issues, some are predicting Congressional action to reduce all FHA lending limits, including HECMs. With continued state legislation and calls for more regulation, this year will no doubt be another less productive year for most lenders and most originators.

    Already complaints are being heard about RESPA changes particularly those encouraging comparison shopping. GFE mandates are causing lenders to add additional restrictions on the ability of originators to provide financial information to borrowers.

    As the dust settles, we will have a far different industry than it was in 2006. Change has come and more change is coming. Some want to push back on changes but now is the time to adjust. While some in the industry insist on being Pollyannaish, brighter days are no doubt ahead; however, it is very difficult to believe that the first half of 2010 will be among those days.

  • I agree with The Cynic. Another reason for such light HECM for Purchase activity is the relatively large down payment required. The housing meltdown has caused many seniors, myself included, to delay their plans to “move down” until their homes have appreciated closer to pre-meltdown levels, so that they will again have sufficient equity to purchase a retirement home.

  • I agree with The Cynic. Another reason for such light HECM for Purchase activity is the relatively large down payment required. The housing meltdown has caused many seniors, myself included, to delay their plans to “move down” until their homes have appreciated closer to pre-meltdown levels, so that they will again have sufficient equity to purchase a retirement home.

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