RMI: Reverse Mortgage Closings to Rise Above 80,000 Units

NewImageThe New York Daily News is reporting that while the number of reverse mortgages originated nationwide fell 35% to 72,683 in 2010, demand is expected to rise with the release of the HECM Saver.

John Lunde, president of Reverse Market Insight, told the NY Daily News he expects reverse mortgage closings this year to climb to between 80,000 and 85,000 nationwide.

Rather than pay off large existing balances, seniors are turning to the Saver to help with things like heating bills, according to Bill Smith, originator for MetLife Home Loans. One client got a HECM Saver to cover the heating bill for her four-story home in Park Slope, Brooklyn.

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“She couldn’t sell it at the price she wanted. She is going to sell when the real estate market improves,” Smith said.

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  • John Lunde has done it again. It is very hard to believe that IF the number of HECM endorsements will be about the same for the current fiscal year as last that they will be 10% to 20% better for the 2011 calendar year over the 2010 calendar year. But that is nothing more than conjecture. There is a far more basic problem with the article.

    It is derelict that so few discuss the difference in note interest rates between Savers and Standards as part of the initial discussion on the differences between the two products. That is a very significant difference which should be pointed out when upfront costs and lower PL Factors are first discussed and not ignored until maybe later. When I just called one of the top three reverse mortgage lenders to see how the person answering the phone addressed this issue, getting directly to the question I asked if the interest rates on the notes were different between something called Saver and the other thing called Standard. The originator immediately said that the upfront interest rate on the MIP (whatever interest rates have to do with MIP) was different with Standards at 2% and Savers at 0.01%. So I asked again if there was a difference in the interest rates. His voice dropped and said “well, yes about….”

    While there have been some nice articles about Savers, I have only seen one where the interest rate difference was even lightly touched. If the hallmark of our industry is trust, then we need to justify and earn that trust. We need to let seniors know that the lower upfront cost could over time be greatly reduced if not entirely wiped out (or more) by the interest rate differential.

    I hear all of the time that the amortization schedule makes that clear. That is nonsense. If the beginning numbers are the same and there are no other differences between what is being presented — perhaps that is right; however, I know of very few loan originators who take two amortization schedules to the initial meeting with the senior and have the information laid out so that fact can be easily recognized. When I hear excuses like “the amortization schedule makes it clear,” the effect is not a good one. To say it feels like sleaze is not that far off.

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