Marc Helm, chief operating officer of Reverse Mortgage Solution told Broker Universe that reverse mortgage default costs are going up. “We are spending so much time on defaulted items and they are so much more expensive to deal with,” said Helm.
“Even though I’m in reverse mortgages, I have defaults and my default costs are just as high as anybody else’s. I’m experiencing that from the REO perspective because my REOs are taking longer to market just like everyone because the market is flooded. I’m trying to stay ahead of the curve on mine and start streamlining some of the areas of my business at a cheaper price so I can keep my level of service up and still be a profitable entity.”
When a borrower dies, if the estate tries to sell the property and they can’t get a decent price out of it they have to turn it back over to RMS, which has to foreclose when they take title.
“That drives another REO out to the market. The ancillary effect from what is happening in the forward world and the reverse world are hurting me on the default side, too. The REOs aren’t going to stop any time soon. There are only so many presales or short sales you can do. Even though the modifications programs are helping, many companies are having a hard time seeing them stick. Some of the numbers I have seen show less than 30% make it through the whole process.”
As we reported earlier, the US Department of Housing and Urban Development is expected to release a Mortgagee Letter addressing HECM’s loss mitigation tools and it could start a trend of lenders foreclosing on HECM loans which are in default due to taxes and insurance.