Reverse Mortgage Default Costs Rise

Screen shot 2010-02-26 at 8.58.02 AM.pngMarc 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.

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“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.

RMS COO’s Focus: Insurance Compliance

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  • While this is not welcomed news, it is a thorny part of the mortgage business. It is sad to see seniors losing their homes over nonpayment of real estate taxes and insurance but those costs apply to any home and any mortgage. Loan covenants are loan covenants.

    It is a real shame that some seniors may feel as if they were not properly warned about the consequences of not paying real estate taxes and homeowners' insurance. However, for most this is not their first mortgage and unlike all other mortgages, not only were such covenants explained by the originator, but borrowers also signed loan docs providing this information AND they also received counseling where this information would have been fully covered. Most all HECM originators I work with make sure the seriousness of default issues is fully discussed.

    I hate misleading and deceiving marketing. It is regretable that some have resorted to ads that provide false promises like: “Stay in your home for as long as you live” with no caveats. It is marketing phrases like this that cause seniors to declare: “It seems too good to be true.”

    For those who obtained a HECM believing that defaults would not impact staying in their homes, this loan will be too good to be true. It is about time that marketing of this nature is dealt a final death blow.

  • While this is not welcomed news, it is a thorny part of the mortgage business. It is sad to see seniors losing their homes over nonpayment of real estate taxes and insurance but those costs apply to any home and any mortgage. Loan covenants are loan covenants.rnrnIt is a real shame that some seniors may feel as if they were not properly warned about the consequences of not paying real estate taxes and homeowners’ insurance. However, for most this is not their first mortgage and unlike all other mortgages, not only were such covenants explained by the originator, but borrowers also signed loan docs providing this information AND they also received counseling where this information would have been fully covered. Most all HECM originators I work with make sure the seriousness of default issues is fully discussed. rnrnI hate misleading and deceiving marketing. It is regretable that some have resorted to ads that provide false promises like: “Stay in your home for as long as you live” with no caveats. It is marketing phrases like this that cause seniors to declare: “It seems too good to be true.” rnrnFor those who obtained a HECM believing that defaults would not impact staying in their homes, this loan will be too good to be true. It is about time that marketing of this nature is dealt a final death blow. rnrn

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