Live Well Financial Introduces New Fixed Advantage Reverse Mortgage

Live Well Financial, Inc. announced Thursday that it will offer a new fixed rate reverse mortgage product, following an announcement earlier this week of the launch of another new HECM loan made available by Reverse Mortgage Funding.

Live Well, an HMBS issuer, says it will securitize the new product, coined the HECM Fixed Advantage, for sale on the secondary market. The product’s features allow the borrower to withdraw the remaining funds from a fixed rate reverse mortgage one year after the loan has closed, after initial use limitations apply for the first year post-closing.

“Instead of requiring a borrower to take a term or tenure payment to obtain the additional funds, the HECM Advantage will automatically provide the borrower with 100% of their remaining funds on day 366,” said Bruce Barnes, executive vice president of Live Well Financial. “This is a significant difference [between the HECM Advantage and the HECM Choice] and one that we believe borrowers and lenders will prefer.”

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Insured by the Federal Housing Administration, Live Well’s HECM Fixed Advantage enables borrowers to draw their maximum principal limit at a fixed rate at closing—60% or higher with mandatory obligations—then draw the rest of their available funds 12 months later.

Live Well plans to make the HECM Fixed Advantage immediately available to all brokers and correspondents through the company’s wholesale channel. When asked whether it was the same product offered by RMF, Bruce Barnes, explained it was a competing product, to be originated and sold to investors by Live Well.

The HECM Fixed Advantage is the second new HECM product to roll out in the past week, Reverse Mortgage Funding’s announcement of its new product, the HECM Choice.

Written by Jason Oliva and Elizabeth Ecker

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  • If HECM Choice and HECM Fixed Advantage are any guide, a slew of HECM fixed-rate offerings from every HMBS issuer on the planet is on the way.
    Here are some things I do not yet understand: Since product complexity and confusion were major themes in CFPB’s report to Congress on reverse mortgages a while back, how do these new permutations of the new HECM Traditional help to address consumer concerns about complexity and confusion in reverse mortgages?
    FHA insurance coverage notwithstanding, how would the CFPB and consumer advocates view these “new” HECM offerings?
    And finally, how would HECM counselors explain these “new brilliant” variations of the new HECM Traditional to consumers?”

    • Atare,

      Greetings to you and your family.

      Since I am not familiar with either product, is it only being offered on traditional transactions? Or are you using the adjective “traditional” in a manner other than as HUD presented on Page 2 of Mortgagee Letter 2010-34 dated September 21, 2010, where the three transaction types of HECMs are listed as 1) purchase, 2) refinance (otherwise referred to as “HECM-to-HECM refinancing), and 3) traditional (the most common transaction type)?

      Your concern about confusion over potential multiple versions of an open end fixed rate HECM product is valid. But is it better to have to deal with consumer confusion or to only offer adjustable rate and closed end fixed rate HECMs? If we do not take this road, then many seniors who obtain fixed rate HECMs will be leaving significant amounts of available proceeds on the table at closing due to the 1st year limitation on disbursements and the nature of closed end HECMs.

      To be blunt, the CFPB should know that this is a convenience to seniors and is a plausible solution to seniors paying fees but having to leave some of what they pay for at closing with a closed end HECM. As to consumer advocates, their general desire to relegate HECMs to nothing more than loans of last resort is well documented; they would panic over a perfectly sound HECM option that does well in retirement but does not fit into their troubling idea of only using HECMs as a loan of last resort. As to counselors, I am sure why they would not see a clear advantage to a modified open ended fixed rate product over a closed end one.

      If the modified products are not received well by the senior community, no doubt they will be off the market rather rapidly. After all where are 1% margin HECM ARMs today or most proprietary reverse mortgage products? As to quickly removing obsolete products, few markets are as efficient as the reverse mortgage market.

      I hope the Agbamu family is having a great weekend and start to the holidays.

  • It is my understanding that RMF worked closely with HUD and the end result is the HECM Choice does not allow the borrower to take all remaining loan proceeds on day 366. They must sign up for term or tenure payments. The HECM Choice, therefore, fulfills HUD’s desire to not have borrowers drain all the money available to them, which as we know, was responsible for a huge increase in T&I defaults.

    I am concerned that the the product created by Live Well will be viewed as nothing but a “loophole” to the recent changes HUD implemented. HUD has been very clear on the intent of the program changes and that is to not allow the borrowers to take all the funds available. Having the borrowers automatically receive all remaining funds on day 366 will likely draw a very negative response from HUD, as well as other industry participants.

    • reversemaniac,

      I was very surprised by your comment.

      The closed end nature of fixed rate Standards did not produce the T & I payment default problem (although as to some the lack of prudent use of proceeds certainly exacerbated the situation) but rather the absence of any significant credit requirements such as financial assessment. Mr. Jeff Taylor made it very clear that we as an industry closed HECMs during the last five fiscal years where it was obvious the borrowers would end up in the not too distant future in default for not paying T & I. If we had had financial assessment over the last five years, much fewer T & I payment defaults would have occurred.

      The impact of the HECMs in T & I default on the MMI Fund are not projected to be nearly as significant as the projected losses from fixed rate Standards going into the due and payable status following the death of the last borrower living in the home and other similar due and payable triggering events. Unless the HECM is in assignment, ultimately the MMI Fund is not impacted from losses due solely to T & I defaults, only note owners, lender guarantors, or in a worst case scenario, the Ginnie Mae portion of HUD are responsible for those specific losses. If the T & I payment defaults result in the HECM going into the due and payable status then the MMI Fund must reimburse note holders on losses but only as to the note balance due in excess of the value of the home at termination.

      The HUD concern over the projected losses from lender reimbursements is so significant that HUD took over $2.2 billion from other MMI Fund programs during fiscal years 2010 and 2011 just to bolster the HECM portion of that fund. But even after all transfers the projected negative net position of the HECM portion of the MMI Fund alone as of 9/30/2012 was $2.8 billion.

      To put to rest the concerns over position of the HECM portion of the MMI Fund, at the end of fiscal 2013, HUD transferred all $1.7 billion out of Treasury directly into the HECM portion of the MMI Fund. On top of that HUD took another $4.3 billion out of the other MMI Fund programs and put it into the HECM portion of the MMI Fund. So as of 9/30/2013 the net position of the HECM portion of the MMI Fund is $6.5 billion which consists of projected cumulative net losses due to HECMs of $1.7 billion and $8.2 billion in transferred funds from Treasury ($1.7 billion) and other MMI Fund programs ($6.5 billion).

      It is great to see such support for the HECM program coming from HUD. Also only a small portion of the HECM losses reflected in the MMI Fund comes from T & I payment defaults since a significant portion of those defaults come from HECMs accounted for outside of the MMI Fund (those endorsed before 10/1/2008 and thus accounted for in the GI Fund).

      (The opinions expressed in this reply are not necessarily those of RMS or its affiliates.)

    • As presented in this article, while the Live Well HECM Fixed Advantage may not have violated the letter of recent FHA HECM changes about funds usage, it clearly offends the spirit of the new rules.
      Major industry players have a duty to obey not just the letter of the rules but its spirit as well.
      Why did we have the drastic changes that became effective October 1st to begin with? Simply: Fully-drawn fixed-rate HECMs almost destroyed the MMI Fund and the reverse mortgage industry.
      That is why a fully-drawn fixed-rate HECM whether on day one (no longer an option under the new rules) or on day 366 (as Live Well’s HECM Fixed Advantage is being sold) is dangerous and irresponsible. It should be withdrawn forthwith for the good of the MMI Fund and the reverse mortgage industry.

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