Reverse Mortgage Market Poised for Comeback?

While the number of reverse mortgage loans originated annually has fallen starkly following the housing crash, those invested in—and who observe—the business itself are not sounding alarm bells, writes a report from mortgage industry publication Mortgage Orb this week.

With input from originators, academics and the National Reverse Mortgage Lenders Association, the article concludes the market is getting ready for a comeback.

Recent changes position the market for recovery, Delores Conway, associate dean and professor of real estate at the Simon School at the University of Rochester, told Mortgage Orb, of the recent suspension of the fixed rate full draw reverse mortgage in favor of the adjustable rate and Saver products. 

Advertisement

“It will help to strengthen the program in the long term,” she said. “The banking industry is still undergoing change from the financial crisis, so we are still working through all of that.”

The product’s details and a lack of understanding have not made borrowers any more prone to taking them, Bentley University professor Steve Weisman told the publication.

“Reverse mortgages are difficult for consumers to understand, and misleading advertising has led to poor consumer choices,” he said, adding, “The withdrawal of larger players is leaving the market dominated by small originators who may not be up to the task of dealing with changing economic conditions and changing regulations.” 

The recent changes also stand to improve the market’s response to reverse mortgages, Weisman said. 

“Many purchasers of reverse mortgages unwisely got the large lump sums provided by the fixed-rate HECM and misused the funds, leaving them in a precarious position as they became older,” he told Mortgage Orb.

Read the full Mortgage Orb article.

Written by Elizabeth Ecker

Join the Conversation (2)

see all

This is a professional community. Please use discretion when posting a comment.

  • Dr. Conway shows she knows little to nothing about HECMs. The banking crisis occurred in mid 2008. The first HECM accounted for by the MMI Fund was endorsed after September 30, 2008. Until October 1, 2009 (a year later), there was still less than 16,100 fixed rate HECMs endorsed. So what is Dr. Conway talking about?

    Dr. Weisman makes some sophomoric comments about fixed rate HECMs and aging seniors. So if less than 16,100 fixed rate HECMs were originated before October 1, 2009, the vast majority of fixed rate HECMs (over 153,000 endorsed fixed rate Standards through January 2013) were endorsed in the last 43 months. So where is the good doctor getting his info and trends? “Many purchasers of reverse mortgages unwisely got the large lump sums provided by the fixed-rate HECM and misused the funds, leaving them in a precarious position as they became older.” Not exactly pearls of wisdom.

    Neither one of these professors deal with the impact of the fixed rate HECM Standard on the MMI Fund in a meaningful way. It reminds me of those who simply blame home values for the mess that the MMI Fund is in.

    Neither the simpletons nor the professors know how to relate what has occurred in the MMI Fund. When home values are high, the program withstands any of the products including the fixed rate Standards well. Let property values drop below a positive 4% appreciation rate and all of a sudden fixed rate Standards become a bigger problem than any other type of HECM. No one can tell how home values will do in the next sixty days so dumping the riskiest product was long overdue which calls into question the competence of the risk management team at HUD. One even wonders why HUD allowed closed end HECMs to be offered in the first place. It was a huge mistake when it was first offered in late fiscal 2006 until now.

    Some industry “brains” were going around saying that profits would turn around the cohort of HECMs endorsed in fiscal 2009. What profits? If profits are the difference between the values of the home and the balances due at HECM termination, that profit belongs to the property owner. If this “profit” is a catching up of the home value to the balances due at termination, that catch up had better hurry up and come since most terminations occur within 8 years of endorsement.

    What makes the industry “brains” look even worse is that within days of presentation of their less than well reasoned analysis, Commissioner Galante announced that the HECM portion of the net position of the MMI Fund would grow to a negative $5.4 billion at fiscal year end from a negative $2.8 billion for last fiscal year end. That goes against what the actuaries gave as their projection for this fiscal year end as they showed it would go down to a negative $2.67 billion. I hope the “brains” will stop their relentless agenda of trying to justify bringing back fixed rate Standards because they make all of us look like a bunch of babbling idiots. These are some of the same folks who were going around Capitol Hill telling members of Congress that the HECM program was self-sustaining when HUD was propping up the HECM portion of the MMI Fund by taking funds from other MMI programs.

  • PROBLEM NUMBER ONE- Many purchasers of reverse mortgages unwisely got the large lump sums provided by the fixed-rate HECM and misused the funds, leaving them in a precarious position as they became older,” CONTRARY TO THIS PERSONS BELEIF- NOT ALL SENIORS ARE IDIOTS!!! ANYONE I WORKED WITH THAT TOOK A LUMP SUM-KNEW EXACTLY WHAT THEY WERE GOING TO DO WITH THE MONEY-AS FOR LEAVING THENM IN A BAD SPOT- OK SO EVEN IF THEY USED THEOR MONEY HEAVEN FORBID ON HOME IMPROVEMENTS- THEIR ARE NO PAYMENTS DUE- UNTIL A YEAR AFTER THEY ARE DEAD-DO YOU THINK THEY WOULD BLOW THE MONEY TO HAVE TO LEAVE THE HOUSE – HELLOOO?? SEE EDUCATION IS NOT EVERYTHING ..PROBLEM NUMBER 2 -The withdrawal of larger players is leaving the market dominated by small originators who may not be up to the task of dealing with changing economic conditions and changing regulations.” LISTEN GENIUS -THE “BIG PLAYERS” GETTING OUT HAS NOTHING TO DO WITH THIS PROGRAM. THE BANKS ROLE IS TO SUPPLY THE FUNDS AND SERVICE. HUD REGULATES THE LOAN AND FHA INSURES THE LOAN-IT IS A “CLOSED ENDED” HOME EQUITY NON RECOURSE – FOR A REASON- DO YOU REALLY THINK THAT IT IS THE BANKS AND NOT THE GOVERNMENT WHO IS GIVING DIRECTION ANYWAY- WHERE HAVE YOU BEEN.. ?? It is no wonder why folks are so confused today.

string(88) "https://reversemortgagedaily.com/2013/05/09/reverse-mortgage-market-poised-for-comeback/"

Share your opinion