Holiday Round-Up: FHA to Halt Fixed Rate Full Draw Reverse Mortgage

NewImageIn case you missed it… here’s what happened in reverse mortgage news this week. 

HUD said it’s considering putting the fixed rate full draw HECM on hold. It was hard to miss the letter sent by FHA’s Carol Galante to Sen. Bob Corker (R-Tenn.) outlining major changes to the program in the interest of shoring up the agency’s insurance fund. 

Knight Capital agreed to sell to Getco. Knight Capital, parent of reverse lender Urban Financial Group, this week announced it has agreed to merge with Getco Holding Company in a deal valued at $1.4 billion. Under the cash and stock transaction, shareholders will have the opportunity to receive $3.75 per share, the companies said. 

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Generation’s CFO said he’s leaving the company. Generation Mortgage Chief Financial Officer Carl Rojas has confirmed to RMD he will depart from his CFO post at the end of the year. Rojas, who was hired as CFO in February after working for Generation as a consultant and then as corporate comptroller, has served the industry actively in his time with Generation a member of the Coalition of Independent Seniors

A micro-loan launched to save reverse mortgage borrowers from foreclosure. In light of an increasing focus on tax and insurance defaults among reverse mortgage borrowers, Asian-American Homeownership Counseling, Inc. is doing its part to rescue struggling borrowers through a short-term loan program that helps defaulting homeowners get back on track.

RMD will be observing the long holiday weekend. Wishing everyone a happy and safe holiday and we will see you back on Wednesday, December 26. 

Written by Elizabeth Ecker

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  • Doesn’t anyone realize that most seniors are “scared to death” of adjustable rate mortgages of any kind? With all the press reports about variable rates and the “mortgage meltdown” my senior clients want nothing to do with variable rates of any kind. They certainly don’t trust the economy going forward with rates being manipulated at historical lows. They want THEIR money and manage it themselves (in-spite of current returns). At a rate of 2% upfront and annuallized rate of 1.25 % monthly for FHA insurance, (combined with 15% reductions in PLF’s) they certainly aren’t the risk component that FHA reports them to be.

    • Phil,

      Our industry did very well during fiscal years 2007, 2008, and 2009 with adjustable rate HECMs. Things may be different but not that much different.

      Please describe this 15% reduction in PLFs. Current PLFs for 62-75 year olds at current expected interest rates were only marginally better prior to fiscal 2010.

      But besides all of that, I am far more concerned about keeping the program for the next two years than marketing and presentation concerns. We learned how to overcome fears about increased interest rates when it comes to adjustable rate HECMs, so can you.

      When I came into the industry the first words out of the mouths of seniors were: “Adjustable rate, I don’t want one of those. You, guys, must have a better product than this. I remember not that long ago when interest rates were at 17%….”

      It does no one any good to exaggerate about PLF reductions and stories about the reaction of seniors to adjustable rate products. Remember fixed rate Savers will be with us even when fixed rate Standards are eliminated. We had no fixed rate anything to offer seniors back in 2005.

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