Major Media Reverse Mortgage Coverage Continues: CBS Early Show

Screen shot 2010-04-27 at 11.18.17 AM.pngThe CBS Early show ran a feature on reverse mortgage this morning during its Money Watch segment. CBS correspondent Rebecca Jarvis discusses the product and recent changes like the elimination of servicing and origination fees.

It’s a positive segment but of course the Consumer Reports “investigation” was briefly mentioned by saying that the volume of reverse mortgages which have “failed” totaled:

2004 – $81 million
2008 – $381 million

Advertisement

“Failed” isn’t the right choice of words, since the numbers represent the total amount of loans which have been assigned to HUD. Anyways, some good primetime coverage, check out the video below.

Join the Conversation (12)

see all

This is a professional community. Please use discretion when posting a comment.

  • Even if the amounts displayed are the losses that insurance fund has paid out for each of the related years, the presentation was exceptionally good.

    • “the presentation was exceptionally good”

      Unfortunately, I strongly disagree. The opening referencing the quadrupling of loans that have “failed” and been “taken over by the government” closed the minds of many seniors to the balance of the program. I had two seniors mention the piece to me yesterday and that they were now 'more concerned than ever' about the “negatives” regarding reverse mortgages.

      • REVGUYJIM,

        While subjective examples are somewhat emotionally persuasive, they are hardly objective evidence. Did you speak to anyone who saw the program and did not react in that manner? Or did you even bother checking? I know I would not.

        I have also talked with several seniors who know what I do and none mentioned the show. Certainly that does not mean they did not see it or that if they did, they did not have a negative reaction.

        I agree with Peter Bell that sometimes we overreact. But that does not mean you are wrong. It just means I find your take on the piece most illuminating.

  • The reporter did a terrible job in that she omitted some of the most advantageous aspects of a HECM.
    FE… because of the high insurance premiums and limits on the loan amount, going forward in today's market, HECM's are safe, the interest rate is low and a “bad” loan just means the Senior lived longer than the actuaries expected and thus profited.
    Then they led with a purposely incendiary misleading stat 'Bad” loans have quadrupled.
    True, but $381 million divided by 31 BILLION is approx 1 tenth of 1% of the outstanding loans.
    That would be cause to celebrate in any other type of mtge.the financial crisis the world is suffering would not exist if all other mtge's had that record.
    As for not leaving behind any equity to your kids and misstating they are “responsible” “with a mortgage to pay”? NO ….YIKES, just not true and would you prefer your parents live in poverty just so you get the house? I could go on , but all of us here could have done a much better more balanced and financially curate job.

    • Todd,

      $30+ billion is not the balance due on all outstanding HECMs. That was the total amount on all HECMs endorsed in the last fiscal year. We have absolutely no idea in what fiscal endorsement years the HECMs that were assigned last fiscal year were endorsed. If they all came from a single fiscal endorsement year where the total outstanding balances due were $1 billion, some might declare that HECMs were another looming disaster. Senator Clare McCaskill (D-MO) questions if that might not be the case anyway.

      Just because the amounts assigned are $384 million, there maybe no loss in that group whatsoever. Or the total MIP collected on those HECMs may exceed any losses incurred. The $384 million was simply the cost of acquisition of those HECMs. Loss cannot be determined until the HECMs become due and payable. Perhaps total losses for that group may be reasonably estimated but that is another topic in itself.

      Your claim that HECMs are safe is interesting. To whom are they safe? They are certainly safe to the borrower and the investor but are they safe to Uncle Sam? Per the Obama Administration, they are very risky to the American taxpayer; otherwise, why the subsidy requirement and the fundamental changes to the program?

      I am afraid the heirs do have a mortgage to pay. A HECM is a non-recourse mortgage by law. The HECM balance due must be paid in full by heirs no matter what the value of the home IF they want to keep the home; if not, either the balance due must be paid in full or if the value of the home is less than the balance due, relinquishing title in the home will satisfy the balance due.

      While equity is nothing more than a simple arithmetic calculation, it is also extremely elusive. While one might have equity today, it could be gone tomorrow for all kinds of reasons. I know seniors who had tremendous equity in their homes when they got their HECM in 2007 and have absolutely no equity in their home today. Did the HECM have any part in that? Certainly it does but the real culprit was devastated home values. Whether or not these borrowers will have equity in their homes at HECM termination is a question that can only be answered by time.

      • Dear The_Cynic

        I was addressing the comments re “safety” of the uninformed, misleading reporter.

        I agree with your safety point.
        When was the last GOV run program that did not turn out to be a fiasco for the taxpayer, the people it seeks to help and or a Ponzi scheme to make Bernie M look like a cub scout?
        Let's see ….. Medicare, Social Security, Medicaid, the 48 year old war on poverty, the war on drugs, Social Security Disability Fund and the poster children for the current on going worldwide (except for capitalist China) crash; Freddie and Fannie ….. don't get me started.
        S/F

  • I am a Reverse Mortgage Specialist with a major national lender. I take issue with a couple of the points made in Rebecca's coverage of Reverses. In the piece, it was inferred that the heirs are left with no equity to inherit. As required, we do an analysis based on the expectled lifetime of the senior, interest rates, and home value, and in 80% of the cases, there is equity to inherit. It was also inferred that the heirs are left with a mortgage to pay off. Not true. When the senior passes on or leaves the home permanently and the home is sold, if the mortgage balance exceeds the net proceeds of the sale, the lender cannot come after the heirs or the estate. The home is the total security for the loan. Thats' why HUD charges 2% of the home value up front for this insurance for the lenders benefit (on a $200,000 this would be $4,000) That is the “expensive” part of the transaction. The other costs are standard title and escrow costs, the same as in a forward mortgage. HUD has limited the “origination fee” that can be charged now, that's all. Used correctly, these can be a great tool to free the senior of any current “forward” mortgage payments(improving cash flow) and take a lot of the worry out of retirement years, allowing the senior to enjoy life. When I meet with seniors, we discuss fully the negatives and the postives of the product. When I am through, many of my clients understand more about the product than than most providers.
    The reason I provide Reverse Mortgages is that: 1. I am a senior and I understand the issues they face, 2. I have seen and experienced firsthand with my clients the lifechanging aspects of these products. It seems that the media always tends to focus on the negatives of this important tool. Frankly, I am tired of hearing it, especially when I see firsthand the difference these make in the lives of thousands of people. And, by the way, the home belongs to the seniors, they worked and paid for it….they should be able reap the benefits of thier hard work! And remember, the seniors make NO payments for the entire time they live in the home. In some recent radio interviews, I have made these same points and have been gratified by the postive comments received.

    • Tom,

      As required by HUD, we all provide prospective borrowers with an amortization schedule (not just “a major national lender”). The problem is that schedule is not worth the paper it is printed on. The only meaningful portion of that schedule is the growth in the loan on a fixed rate HECM and only a fixed rate HECM. Is it reasonable to assume that a home will grow by a 4%, 1%, or say 14% annually? What if the home value drops substantially by year 3 and the home is sold then? Will there be any equity? The (worthless) amortization schedule shows there will definitely be some but will there be? If there is, will it be substantially the same as shown on the schedule?

      As to the true non-recourse rule please see my earlier comment. In fact there is a mortgage to pay off. However, the pay off is limited to the lower of the balance due or the value of the home IF the home is not being retained by the borrower or the heirs. If the home will be retained, the entire balance due must be paid in full.

      Unfortunately the expensive part of most HECMs is rarely the accrued MIP. It is generally the accrued interest.

      • Cynic, I agree with you that this was a generally positive piece.
        As you know, I am more of a average potential RM user than you people in the business. Perhaps, that is why I saw this the way I did.
        .

  • Interesting points.

    However the false impression is given that the home's existing mortgage must be “paid off, most of it at least”. Unfortunately this gives the impression that the mortgage balance must be zero or very little to qualify when in reality a substantial mortgage balance can exist as long as there is enough proceeds to payoff the mortgage and pay the financed closing costs.

    This may seem like a minor point, but there are many seniors who need to eliminate their existing mortgage payment who think they cannot due to this false impression.

  • Cynic, I agree with you that this was a generally positive piece.rnAs you know, I am more of a average potential RM user than you people in the business. Perhaps, that is why I saw this the way I did.rn.

  • Dear The_CynicrnrnI was addressing the comments re “safety” of the uninformed, misleading reporter.rnrnI agree with your safety point. rnWhen was the last GOV run program that did not turn out to be a fiasco for the taxpayer, the people it seeks to help and or a Ponzi scheme to make Bernie M look like a cub scout?rnLet’s see ….. Medicare, Social Security, Medicaid, the 48 year old war on poverty, the war on drugs, Social Security Disability Fund and the poster children for the current on going worldwide (except for capitalist China) crash; Freddie and Fannie ….. don’t get me started.rnS/Frn

string(107) "https://reversemortgagedaily.com/2010/04/27/major-media-reverse-mortgage-coverage-continues-cbs-early-show/"

Share your opinion

[wpli_login_link redirect="https://reversemortgagedaily.com/2010/04/27/major-media-reverse-mortgage-coverage-continues-cbs-early-show/"]