The first in a five-part series on reverse mortgages, Inman News published an article this week addressing the impact of the financial crisis on the reverse mortgage market.
Written by Jack Guttentag, “The Mortgage Professor,” the article delves into the history of reverse mortgages and today’s market influences, including declining home values, retreat of the private market, tax delinquencies and large lender exits.
…The financial crisis and decline in home values had a major impact on the HECM program. Declining home values increased losses to FHA on outstanding HECMs, and reduced the NPL on new HECMs. The negative impact of declining property values, reductions in the assumed rate of property appreciation, and increasing mortgage insurance premiums were only partly offset by lower interest rates.
The crisis also drove the private jumbo programs from the market. These mortgages were all securitized, and when the private mortgage securities market collapsed, the relatively small part of it directed to reverse mortgages collapsed with it. The market hole this created was partly filled by an increase in HECM loan limits, with a uniform national limit of $625,000 replacing a patchwork of lower county-based limits.
The financial crisis also saw the emergence of a new and unanticipated problem: tax delinquencies. An increasing number of HECM borrowers are not meeting their obligation to pay property taxes, which puts them in default and vulnerable to foreclosure and eviction….
Gutten tag also details some of the most recent changes in the reverse mortgage market and a preview of what’s ahead.
View the full article at Inman News.
Written by Elizabeth Ecker