Friday Round-Up: Regional Swings and T&I Escrows

In case you missed it…here’s a recap of reverse mortgage news this week:

RMI studied booming regions for reverse mortgages and looked for reasons why. In some areas where reverse mortgage numbers are thriving, the reasons aren’t so clear cut, said the report from Reverse Market Insight. The report addresses some of those areas across the country and aims to get at why some do better than would be expected when it comes to market penetration and adoption rates of HECM loans.

A Texas bill that would drastically change reverse mortgage lending died in the House. The state bill, which would extend the repayment period for HECM loans to a 15-year time frame, did not pass through the House of Representatives, meaning it loses any chance of being passed this year.

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POM Escrow announced it is teaming up with counseling agencies to help reverse mortgage borrowers with taxes and insurance payments. Piece of Mind (or “POM”) Escrow Services, a Chicago-based division of National Tax Search, LLC has developed a third party bill pay service to help HECM borrowers manage the payment of taxes and insurance.

Housing starts and builder confidence pointed to a continued decline for housing. April housing starts fell 10.6% from the previous month, posting the greatest decline since October 2009 and National Association of Home Builders/Wells Fargo Housing Market Index, showed the rate remained unchanged in May at a level of 16.

A proposed CFPB bill included a commissioner who will oversee reverse mortgages. Introduced by Rep. Spencer Bachus, the bill that would reform the CFPB and included in the bill is an amendment that assigns one commissioner to oversee the bureau’s activities in protecting consumers who are older or are veterans from abusive, unfair and deceptive lending practices.

…and expansion continued for several reverse mortgage companies. White Plains, N.Y.-based Guaranteed Home Mortgage launched a reverse mortgage division, First Century Bank said it plans to aggressively expand by adding 30-plus reverse mortgage originators to its business, and Generation Mortgage announced it has opened a retail branch in Puerto Rico.

Written by Elizabeth Ecker

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  • Elizabeth,
     
    Your article on escrows and the counseling agencies was very intriguing; however many questions remain unresolved.  Is it possible for you or John to do a follow up article in the next few weeks?
     
    The first important issue is whether or not there is any (direct or indirect) financial benefit to the counseling trade association itself, counseling agencies, or counselors when counselees buy into this concept.  If there is, that would be disturbing.
     
    There is no indication how counseling will separate those who will comply with the taxes and insurance covenant from those who will not.  If this cannot be done with some degree of reliability then this concept seems nothing more than an unnecessary expense for borrowers and potentially easy pickings for the escrow firm.  Even then since this is a voluntary program, it is rarely the ones who irreversibly default on covenants who participate but rather those who comply.
     
    Right now there is only a 4% default rate and of those who have defaulted there is no clear indication how many are irreversible.  With over half a million HECMs outstanding there would seem to be a sufficiently large enough population of those who irreversibly default (from among the 4%) to gather data on their characteristics at the time of counseling so as to reliably predict those who have a high propensity to irreversibly default but we are not there yet.
     
    Currently there appears to be so little information about those who might default that this “benefit” for seniors seems more like a detriment.  However, in fairness to everyone, more information is needed.  It would be great if costs and interest earnings on the amount held in escrow can be described along with a copy of the escrow agreement provided for review.  Right now, you have at least made us aware of the situation so that we can caution applicants about participating in this escrow program. 

    • Hi Cynic,
      All good questions and commentary. We will continue to find out more about the program and will keep RMD readers posted.

      Elizabeth

    • Cynic, 
      I’m told the counseling agencies do not receive any financial benefit from the service or related products. They are simply educating borrowers with regard to the service and others available in handling T&I payments. 

      Elizabeth

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