Chart of the Day: Fixed Rate Reverse Mortgage Spike Tapers Off

Over the past two years, the percentage of fixed rate HECMs has surged to the point where it far outweighs the proportion of adjustable rate loans, a recent chart created by the Department of Housing and Urban Development depicts. However, in 2011 to date, the percentage has showed a slight decrease.

The increase to more than 65% of the market at a fixed rate is a drastic increase over past years when the percentage hovered under or near 10%. To date, 67.4% of HECMs in 2011 are of the fixed rate type, compared with more than 69% in 2010.

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The chart was originally presented by HUD’s Karin Hill, HUD’s Office of Single Family Program Development director, at a recent Texas Mortgage Bankers Association conference in Houston.

Written by Elizabeth Ecker

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  • Are the percentage of Fixed Rate HECM Standards really tapering off?  Or is this a “feel good” chart?  
     
    To get a clear picture one needs to remove all Savers from the calculation.  Many lenders describe Savers as incremental business, not a product choice alternative.  When we compare Standard Fixed to Standard Totals, the percentage of Fixed rises to over 70.7%.  That is exactly what would be expected in a down market, higher profit origination to be emphasized.
     
    The ethical issue of the over origination of fixed rate Standard HECMs has never loomed larger.  Even if Savers are used in the calculation, does the picture REALLY look better?

    The ethical implications of this seemingly overuse of the Fixed Rate product will be lost in the noise which comes from the pirahna swarming like behavior of lenders snatching up “their share” of the market left behind by Bank of America and Wells Fargo.  When blood is in the water, join the pack or get out of the water. 

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