Consumers Start Petition Asking HUD to Release HECM for Co-Ops

NewImage.jpgThe wait for the US Department of Housing and Urban Development to issue guidelines for the of HECM’s for co-ops continues and consumers have started a petition to drum up support.

The OC Register is reporting that roughly 30 residents gathered to learn about how they could receive a HECM for their co-opes in Laguna Woods Village, CA.

Despite the Housing and Economic Recovery Act of 2008 including a provision for co-op owners to get a reverse mortgage, lenders and borrowers continue to wait for HUD to issue guidelines before they can start offering them.  “The best guess ETA on this is three to six months,” said Esther Yamashiro, a representative from HUD in Santa Ana.

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About 25 residents signed a petition for HUD Secretary Shaun Donovan asking the agency to immediately offer reverse mortgages for co-op owners.

To learn more about the petition and to sign up, check out the article.

The woman behind the petition provided us a copy, you can see it here.

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  • It is now almost TWO YEARS since HERA passed and I can honestly say that it is an embarassment that HUD still has not figured this out. I have over thirty people who call me on a continuous basis who need this badly. I'm sure there are thousands of others.

    • Michael,

      Patience is a virtue but the irrational complaints of industry veterans are not. Lawmakers can legislate their “good ideas” but implementing them can be next to impossible. HUD may believe they are near a decision, but lenders are mixed about offering HECMs for co-ops.

      Securing personal property is not nearly as easy as securing real estate. It is even harder when HUD is dealing with the laws of 50 states. But no doubt you have the suggestion which will work. Rather than throwing gasoline on a fire which should be put out, may be you can enlighten us on how the situation can be resolved.

      • I don't understand what you mean. Loans are being made on Co-ops everyday and I can't even guess how many propietary Reverse Mortgages were made on Co-ops already (I did a bunch) This is not rocket science and to the best of my knowledge, there are only three states that even have Co-ops in them (NY, CA, FL) with well over 90% of them in New York. It should not have taken HUD more than a few months to get this program going. Two years is beyond unacceptable.

      • Michael,

        Like I said, you understand the situation. Maybe you can start by explaining why there were never any reasonable reverse mortgage options available to the co-op owners in Laguna Woods except through Financial Freedom as Home Keepers and before Fannie Mae stopped offering Home Keepers, Financial Freedom stopped offering this program to them. Today there are no reverse mortgages available to these co-op owners.

        Even if HUD gets a program going, what if no lenders participate? While it may not be rocket science, it took Congress well over one hundred and fifty years to come up with FHA and over two hundred years to come up with the idea of the HECM program.

        I doubt if even one of the reverse mortgages you provided those NY co-op owners had the ratio of available proceeds to value that a HECM does unless the value of those co-ops exceeded the lending limit in effect in that area at the time you made those loans by more than 40%. When the loans went into effect were the starting interest rates lower than HECMs? What reverse mortgage products are you providing these owners today? Your alluding to the past is nothing but history. Discussing the situation in the forward market is totally different from the investors’ stand point.

        To a lender and investor, taking a security in personal property on a loan that negatively amortizes is a difficult proposition to hurdle over. You seem to believe that the laws on co-ops are at worst similar between the states and since they are concentrated in three states, well a workable national policy is a snap but the truth is HUD’s policy must incorporate 47 other states that have co-op laws and some territories.

        HUD does not want to provide assignment on these loans. So how much longer will an investor be required to hold this loan than a HECM on real property? HUD and FHA were not unaware of co-ops before 1984 when the idea for a FHA product was germinating. The problems back then have not materially changed as of today. They would have incorporated co-ops back in 1989 if there had been a reasonable way to do it. Somehow your premises seem to espouse the idea that co-ops are a new concept to FHA. The truth is, they are not.

        But you are already well informed. I’m sure you can provide the answers everyone will immediately agree should be applied, making this an easy and acceptable addition to the program. For most it is far easier to complain than contribute.

        Have a great weekend!!!!

      • As for your “points”

        1) There are no Reverse Mortgage products for Co-ops now (except for Bank of America's product) I'm not sure why you are asking why that is.
        2) Why would lenders not participate in a HECM for Co-op program? Who cares that it took 200 years for FHA to come up with the HECM, Did you expect there to be HECM's in the 1800's?
        3) Every Co-op Reverse loan was done at a higher rate than the HECM's were at that time. I don't think Co-op borrowers will complain too much if HUD decides to add a little to the rate for Co-ops.Why is this relevant?
        4) There were thousands of Propietary Reverse Mortgages made on Co-ops and there are hundreds of thousands of forward loans being made on them as we speak. Fannie has no problem buying those loans and this”problem” you speak of has never been a problem. It just seems that you (and HUD) don't understand how Co-ops work
        5) If Co-ops are not a new problem for FHA, why has it taken two years to figure out what every major lender and Fannie Mae already seems to know.
        I am so astounded that you, of all people would write ” For most it is far easier to complain than contribute.” You have proven that time and time again. Have you ever contributed anything? Have you ever even closed a Reverse Mortgage? We will never know, because you hide in anonimity.

      • Actually Minnesota has the 1st co-op in the US started in 1978 and continues to operate successfully today. More than once I've heard that MN has more co-ops than any other state, yes, even more than New York. I don't have the documentation of this and don't know if it matters other than there are more than the three states you list that have co-ops.

        Yes, I too would like to see HUD move forward with co-ops but there have been other programs that have been passed by legislation that have taken HUD a long time to implement and some that they never implemented (one having to do with long term care insurance that President Clinton signed at the end of his term). So I'm not holding my breath. Especially with the changes with the condo's where borrowers actually have their own property identification number.

      • I never knew about Co-ops in Minnesota, thanks for informing me. I highly doubt that there are more in MN than in New York, but I will look into it.

      • Wow The critic you are trying to be positive? Are you feeling “ok”? : )
        I don't think this is going to happen…obviously its been on the back-burner for a long time and (I believe) it will stay there for HUD. There is no doubt many seniors in co-ops want a HECM its just a really unfortunate situation they find themselves in.

      • 2545,

        Help me out here. What is it that I said that is so positive? I appreciate the compliment(?).

  • I just got off the phone with Sally, a homeowner who owns a co-op in Laguna Woods Village. She's so frustrated with HUD's delay … last week she listed her home for sale so she could purchase a condo in Laguna Woods Village. She loves her home but the mortgage is too painful, so she's selling it in order to qualify to purchase a condo in Laguna Woods Village with a HECM, so she can get rid of her monthly mortgage payment.

    And that option will end for her and all homeowners in Laguna Woods on December 10th, because that's the date the HOA is no longer FHA approved. And it's unlikely the HOA will be able to get re-approved for a while because of the homeowners recent lawsuit against the HOA.

    • rainmand,

      For those of us who have been working in Laguna Woods for a number of years, this is nothing new. Several of us have put the reverse mortgage known as the Home Keeper on co-ops in Laguna Woods in years prior to 2008.

      In 2007, Mr. Daniel Mooney of the Santa Ana HUD HOC and Representative Campbell (R-CA) spoke on pending legislation and co-ops at a publicly televised meeting in one of the large meeting rooms in Laguna Woods. Mr. Mooney was emphatic on how difficult the co-op approval process would be even if enabling legislation did pass. Well over 100 Laguna Woods homeowners attended as well as several reverse mortgage originators including Ms. Angela Conrad, Mr. Jim Carlson, and me.

      On July 31, 2008, immediately following the signing of HERA, Mrs. Margaret Burns in an industry teleconference call put out a timeline for the implementation of HERA. She speculated that the co-op provision could take 6 months or more to implement. Within days of enactment, some warned it could take several years to implement especially if lenders were inflexible in shouldering some of the risks associated with loans on shares of stock.

      On several occasions the co-op owners have looked to convert their personal property ownership interests into real property interests through the conversion of their units into condos. As they watched their home values plummet, it became apparent the conversion costs could exceed benefits; yet the values of condos of similar size and association dues did not seem to fall as rapidly. When Financial Freedom first withdrew the experimental Home Keeper program from Laguna Woods and later Fannie Mae, the entire program, bleakness among co-op owners only seemed to increase. For many, co-op values dropped by more than half.

      Every month for the last 23 months when a new edition of “Life After 50” hit the newsstands, we got more than our fair share of calls from Laguna Woods co-op owners pleading their case and situations. For many months rather than writing on the co-op issue, we simply ignored it so as not to stir false hopes. It was obvious that HUD could not resolve significant issues related to co-ops; otherwise, they would have issued a Mortgagee Letter on co-ops.

      This is a national issue with hundreds of thousands of seniors involved. If you really want to help, meet with Senators Boxer and Feinstein along with U.S. Congressman Campbell who represents that district. Expressing your views at the NRMLA National Policy Conference and Road Shows to HUD officials would also be helpful. Working with co-op homeowner associations both locally and nationally could be helpful. But these suggestions actually cost time and money.

      Reverse mortgage originators engaging in inflammatory writing and empty claims and promises will ultimately do more damage than good. You might appear a hero to some co-op owners at the expense of the industry and other originators who are attempting to care for the disappointments of these seniors as best they can.

  • I hear that there is no appetite for co-ops in the secondary market. The banks don't want co-ops and there is no pressure by them to get this figured out.

    • I highly doubt that. Conforming and Jumbo Co-op forward loans close every day and what secondary market fear can there be if the loans are insured by FHA and teh securities are issued by Ginnie Mae?

      • Michael,

        Another problem solved!!! Which investors are it that are buying up all of our adjustable rate HECMs? Who is selling these to Ginnie Mae?

        It seems your experiences in this industry are greatly limited. You probably only deal in fixed rate products, so naturally you are vision would be very limited. When did you do your first reverse mortgage?

        If lenders thought they could easily sell a loan secured by personal property with government guarantees, then they would have been the petitioners at the meetings.

      • I'm selling Adjustable HECM's to Genworth and Generation. They're twlling me that they are selling them to Ginnie Mae, Who are you selling them to?
        Once again, don't question my experience when you hide in anonimity. For all we know, you're a janitor who works at a Mortgage Company.
        Your assumptions are ridiculous.

      • Michael,

        If I knew what twilling or anonimity were, perhaps I could answer your statements. I do not work at a “Mortgage Company.” I would be proud to be the janitor at our firm if that was what I needed to be doing. It seems you do not feel the same. No doubt you are too important, even so important you can afford to use words few have seen.

      • Michael,

        Yes, I certainly do my fair share of complaining but what can you expect out of a “Mortgage Company” janitor.

        By clamoring “others do it why can’t HUD” or some such idea, you seem to miss a crucial point. HUD is not a lender; it is an insurer. Name another company that is currently insuring reverse mortgages for lenders? Name one that has done it for loans (I dare not call them mortgages) on shares of stock which are structured like the real thing, reverse mortgages?

        Wikipedia states: “Mortgage, a security interest on real property granted to a lender, as in mortgage law.” I am just a lowly janitor but could it be there is a difference between title in real estate and ownership in a share of stock? By its very nature, there cannot be a reverse mortgage to a co-op owner on his/her co-op interests; however, the corporate entity (the co-operative) can place a mortgage on the real estate it owns. Wouldn’t the increase of a real mortgage on the land and building change the value of a share of stock in the corporation that owns the building and land? How does one insure against that occurring? But then again as you say I am but a janitor.
        Again Wikipedia states: “A shareholder in a co-op does not own real estate, but a share of the legal entity that does own real estate. Co-operative ownership is quite distinct from condominiums where people ‘own’ individual units and have little say in who moves into the other units. Because of this, most jurisdictions have developed separate legislation, similar to laws that regulate companies, to regulate how co-ops are operated and the rights and obligations of shareholders.” Obviously by your standard the author(s) is a janitor as well. Wikipedia points to right across the Hudson River in a state where many, many janitors live (New Jersey) as another state where there is a high concentration of co-ops.
        Then there are problems with chain of title. In Laguna Woods which is primarily a senior community, there are condos and co-ops. On the condos we can trace ownership until we are blue in the face. It goes all the way back to the King of Spain and his granting of property rights. But stock in a corporation is not so easy. With these units, we immediately call the title company to have them tell us how the stock is owned.

        With the condos, as a real estate broker (oops, I forgot you have instructed that I am a janitor — so sorry) I am very familiar with the different forms of ownership. I can also look at priority in ordering the rights of lenders and lien holders. With co-ops that information is much more difficult to obtain and the laws are somewhat different and worse they are different between the states.

        But then again sometimes we, lowly “Mortgage Company” janitors, must slow down and realize people like you need high caliber reference materials at a level of Wikipedia in order to discuss highfalutin ideas on those thing-a-magigits you guys in Brooklyn call co-ops.

  • in reply to michaelpinter
    #1- Forward loans and Reverse Mortgages are like comparing apples and oranges on the secondary market. I didn't say it was secondary market fear. I did say it was secondary market appetite.
    #2- I think you answered your own question: In this market FHA is in no hurry to insure them. I hope you are really not naive enough to think that the reason HECM for co-op is not available is because it is taking them two years to figure out the guidlines!

    • I still have no idea why it is taking two years. I also don't understand why there would be less appetite for a Co-op loan insured by FHA as opposed to a condo or SFR loan insured by FHA. Both have zero payment risk.

      • Michael,

        If one HECM can be redeemed at the crossover point and the other must wait until termination to receive full payment, which has more value? If the latter HECM (the HECM for Co-op) must be sold on the open market before termination, the risk of loss which HUD will not cover could be immense.

        No HECM is insured by HUD against loss from sale on the open market but then I am but a lowly janitor in your estimation so what do I know about such lofty ideas when compared to someone with full lack of anonymity (I guess)? I am humbled.

        By the way who is michaelpinter? I doubt if anyone was born with just one name like that. What is kind of funny is a friend called to say that some NYC RM originators were asking who Michael Pinter is and no one knew you. Some live in anonymity even when they allegedly use their real name.

  • Now that we know you are a Realtor, I must say that I would have had more respect for you if you at least worked in a mortgage company (even a s a janitor). I can't even imagine spending the time that you do, to post criticism on a Realtors site, why do you waste our time?

  • Now that we know you are a Realtor, I must say that I would have had more respect for you if you at least worked in a mortgage company (even a s a janitor). I can’t even imagine spending the time that you do, to post criticism on a Realtors site, why do you waste our time?

  • OK, fellas – I hope the bickering is over :).

    I am not a mortgage expert, I am a real estate broker. I bought my first coop residence in 1984 in Manhattan and as a professional, have sold over 120 coops in New York and New Jersey over the past 10 years. Within this past year, I assisted my mother, at 84, in getting a reverse mortgage on her house through WF, which netted approx. 75% loan to value as credit line. I also assisted a neighbor in our coop, approx. 71 years old, in getting a HECM from B of A, a private product that netted her about 25% LTV – and about half the upfront costs that my mother paid. I may be missing a chunk of education on secondary market and intricacies of HUD, but I, too, don’t understand the hangup on HUD approval of HECM’s for coops. Every major US lender who does business at all in NYC area has been writing coop loans for several decades. These include Wells Fargo, Bank of America, Chase, Citi, HSBC, Bank of New York, and many others. Formerly they charged a slightly higher rate than homes & condos but in the last half a dozen years I found the rates are pretty much the same. My coop board just cut a killer deal for a fully-amortized underlying mortgage refi for 15 years at about 3.5%, as did a recent individual coop buyer customer of mine.

    In NY/NJ metro area, coop value depreciation has not been much different from condos and homes – more or less in tandem with the overall metro market, which averages around 20-25% from peak, unlike less fortunate areas of the country. Further, the majority of NYC and some NJ coops restrict financing to 80% max and set debt-to-income ratios and post-closing asset guidelines more conservative than the banks, so very few coops have fallen under water the way that homes purchased with 100-105% financing have in the past few years. Manhattan residential property is probably about 75% coops; perhaps this has contributed to its greater relative strength against other major markets?

    Again, I’m not a financing nor legal nor HUD expert so perhaps someone can help me out here. I’m not clear on how state-to-state laws should affect how HUD views cooperative corporations; I believe individual coops differ more than state to state structures though most follow a more or less boiler plate plan. Still, any lender must first approve the “project” before providing the loan. Is the issue that HUD could not disapprove an individual coop project if they’re backing these at all? That would be bad, as there are well-run coops (the majority) and problematical ones (the ones that make the news). Fannie Mae’s guidelines had included 50%-plus owner occupancy, for example, so coops with high O.O. got the easiest/best buyer financing (easily re-sellable). Why can’t HUD just pre-set guidlines like F.M and at least make this desperately needed product available to seniors who own shares in well-run coops where they’ve earned their equity? With low LTV limits that escalate gradually as the senior ages, aren’t HECM’s written with extra conservatism in the first place?

    Also, in my 120+ coop transactions I have never had an experience with lien searches being problematical or difficult to obtain. Title is with the coop, a state-registered corporation and if anyone cares to research the property it sits on back to the King of Spain they may do so. All liens against the individual unit stock are filed in the county and the attorneys order U.C.C. searches for them. The coop (HOA) always comes first, according to the standard proprietary lease.

    I am so weary of hearing “in about 6 months” every 6 months for two years already. Anyone have a clue where they stand? Thanks for any insight!

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