Executive Remains Bullish on Long Term Prospects for Reverse Mortgage Industry

Despite an expected downturn in reverse mortgage volume for 2010, Torrey Larsen, President of Security One Lending remains very bullish on the long term prospects for the reverse mortgage industry. “I see three macro trends that I believe will create an increasing awareness and use of Reverse Mortgage products,” said Larsen.

First he said that there are over 80 million boomers entering their retirement years who will increasingly need sources of income streams. Secondly, the recent recession has resulted in a significant decline in their retirement portfolios and they are looking for alternative sources of capital to help alleviate their financial crunch said Larsen.

“The third trend that will develop is the increased liquidity for privately labeled HMBS securities as investors seek alternative income derived products without the negative convexity that traditional MBS hold. This liquidity will enhance product development efforts and increase the product’s reach to borrowers that may not fit the current FHA HECM Borrower Profile,” said Larsen.

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He added, “I am also encouraged by the Obama Administration requesting a $250 million in credit subsidy for the FHA’s reverse mortgage program along with a contingency appropriation to meet all program demand, even if demand exceeds projections.”

Overall, he expects to see industry volume drop 20% during 2010.

Torrey Larsen, President of Security One Lending, Forecasts 20% Drop in 2010

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  • While I agree with the first two reasons Torrey gives, I am far less optimistic that the endorsement of the President means much in the appropriations battle related to the HECM program.

    Last year, the President recommended that $798 million be provided in appropriation plus an automatic 2.66% for endorsements in excess of $30 billion. Not only did we not receive anything, Congress has yet to pass any appropriations bills related to HUD other than Continuing Resolutions. The endorsement and recommendation of this President at least in regard to the HECM program even with a Democratically controlled, House, Senate, Congressional Appropriations Committees and Subcommittees is less than meaningful.

    On this point I hope Torrey is right and I am wrong.

  • These are all points we all have known why this was going to be a great long-term industry. This is no longer the case.

    In the last paragraph it's noted that they are encouraged that the 250 million subsidy will take place. If so it's still not going to resolve the increase in MIP which will reduce the funds available to clients.

    What about interest rates…they only have one way to go. This will also reduce the amount of funds available tremendously over time.

    What about home values? This is not going to turn around over night. If the seniors don't have enough equity we don't have a chance regardless of how badly they need/want it.

    Right now typically a 62 yr old needs about 50% equity. When the MIP is increased and rates begin to rise they will need 75% – 80%. This will greatly reduce the amount of seniors we are able to help even if there is a baby boom generation.

    All of the issues noted above are going to hurt our product. As noted in the article 2010 is going to have a reduction in production. Given the issues we are facing its going to be many many years before we come back to the production of 2007 or 2008 : )

    Have a good day!

    • 2545,

      While I appreciate the obvious, your emphasis like so many others in our marketplace is on the impact these changes will have on the 2%, i.e., the needy. Again and again we prove our lack of vision on how to increase the appeal of HECMs to the majority of the 98% of senior homeowners who do qualify.

      While it seems to be a “mark of excellence” that we can sell to the needy, it is hardly the challenge of making HECMs more appealing to so many others. I hope the NRMLA campaign will draw on experts who will provide more guidance in this direction. “… Now let the home pay you…” is hardly the campaign that draws those who are outside the ranks of the needy. It mainly justifies to the needy why it is really OK to get a HECM.

      The real challenge is not just surviving in the current housing appreciation downturn but more importantly finding ways to make inroads into those segments where this product will be acquired because of its appeal as a true finanical and cash management tool.

  • 2545,rnrnWhile I appreciate the obvious, your emphasis like so many others in our marketplace is on the impact these changes will have on the 2%, i.e., the needy. Again and again we prove our lack of vision on how to increase the appeal of HECMs to the majority of the 98% of senior homeowners who do qualify.rnrnWhile it seems to be a “mark of excellence” that we can sell to the needy, it is hardly the challenge of making HECMs more appealing to so many others. I hope the NRMLA campaign will draw on experts who will provide more guidance in this direction. “… Now let the home pay you…” is hardly the campaign that draws those who are outside the ranks of the needy. It mainly justifies to the needy why it is really OK to get a HECM.rnrnThe real challenge is not just surviving in the current housing appreciation downturn but more importantly finding ways to make inroads into those segments where this product will be acquired because of its appeal as a true finanical and cash management tool.

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