HECM Refinances Difficult in Current Economic Climate

While HECM refinances played a big role in reverse mortgage endorsement volume for FY 2009, Generation Mortgage Chairman Jeff Lewis notes that the current economic climate has stepped in to change that.

For a HECM refinance to be possible, either the value of the home has to rise or the person has to get a lot older.  And even if the person might get more from being older, the house would still need to be at least back where it was when the reverse mortgage was taken out.  “Given how difficult it is in this appraisal context, [it’s] hard to think of many cases when a refinance would be possible, “ said Lewis in a conversation with RMD.

During FY 2009, HECM refinances totaled 8,985 and were up 102.6% compared to FY 2008.  According to the latest FHA Outlook Report, HUD is projecting 7,268 HECM refi’s in FY 2010.

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In addition, Lewis notes that the drop in principal limit factors (PLF) has a negative effect on the amount of money a borrower would be able to receive from refinancing.

“At the end of the day if a person needs money and they can do it, it’s hard for me to see a lot of cases when it would not be in their best interest,” says Lewis.  Nonetheless, given the current climate, “I don’t think it’s a huge issue for our industry,” he adds.

Written by Reva Minkoff

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  • Sorry you are put off by the article Critic. Maybe focus a little more time on originating loans and less time trolling websites all afternoon.

    The article is valid and provides good information. Sorry it was not up to your standards.

    • ReverseGuy,

      Your remark sounds like the voices in our industry which tell us there is no excuse for the January sales numbers being so far off. “If originators would simply stop listening to so much negative talk this would have been the best January ever.”

      What news is there in this story? The obvious is the obvious. If that is news to you, then it is news to you. I found it a waste of Mr. Lewis's time. I was disappointed he found the time to make these remarks.

      There are real issues in this industry. When our leaders find the time to discuss mundane issues of this nature, it says the big issues cannot be fixed, the speakers are defeated, or they have accepted the inevitable. I really don't like what it reflects at a time when our industry leaders need to be focused on much more critical matters.

      I'm very glad you liked it. In less critical times, I would not be complaining — as much.

  • The article says: “For a HECM refinance to be possible, either the value of the home has to rise or the person has to get a lot older.”

    Add that (1) rates are at near historic lows. The Expected Rate is a main determinant of Principal Limit, and (2) the lending limit is now $625,500. Older HECM's were originated with much lower limits.

    Ibis has software that culls databases for good Refi prospects. It has been used successfully by a major originator.

      • You do not need to be an Ibis RMO or RMA customer. The Ibis Refi software is a separate, proprietary product. It is not economic to set it up for fewer than a couple of thousand existing HECM's.

  • You do not need to be an Ibis RMO or RMA customer. The Ibis Refi software is a separate, proprietary product. It is not economic to set it up for fewer than a couple of thousand existing HECM’s.

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