Friday Round-Up: HUD Reveals Final Rule Plans, Positive Media Coverage

It’s the end of a busy week in the reverse mortgage world, one that saw  the two-day National Reverse Mortgage Lenders Association’s eastern regional conference in New York City and a flurry of popular-media stories about Home Equity Conversion Mortgages.

RMD’s coverage of NRMLA topped the list of most-read stories this week, with readers turning to a pair of posts about the Department of Housing and Urban Development’s plans for the implementation of the Final Rule later this year.

In case you missed them, here’s a recap of the five most popular stories on RMD this week:

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Trump’s HUD Unlikely to Stop Final Rule for Reverse Mortgages — It was an offhand comment, but it made significant waves in the industry: NRMLA president and CEO Peter Bell kicked off his organization’s regional conference on Monday by claiming that he was “comfortable on the direction” of the coming Final Rule changes, adding that he didn’t “see any reason why [HUD] would interfere with the publication” of the new regulations in September. Bell’s reassurances came at the beginning of lengthy panel discussion on the new rules, featuring stakeholders from HUD and the industry.

HUD Lays Out Timeline for Reverse Mortgage Final Rule — Later on Monday, HUD officials gave a blow-by-blow breakdown of how the final rule will be rolled out, from “self-implementing” regulations that take effect immediately on September 19, to longer-term initiatives that still require clarification in the HUD Single Family Housing Policy Handbook or anticipated mortgagee letters.

Reverse Mortgages Aren’t For Everyone, But Could They Be? — It’s a common refrain among even the most ardent reverse mortgage supporters: They’re great products, but they aren’t for everyone. RMD asked some of its sources in the HECM world for suggestions on how the program could be expanded to include a wider pool of borrowers, and got a surprisingly wide range of answers.

Reverse Mortgage Endorsements Spiked in March, But There’s a Catch — New data from Reverse Market Insight showed a strong March for HECM endorsements, but without a corresponding spike in Federal Housing Administration applications, the research firm warns that we could simply be seeing the release of a springtime endorsement bottleneck.

CBS: Reverse Mortgages Don’t Get No Respect — Channeling the late, great Rodney Dangerfield, CBS MoneyWatch called out the HECM’s lack of respect in the financial-planning world — and for the second time in a week, the network and its financial news website provided positive coverage of reverse mortgages.

Reverse mortgages around the web

HousingWire Breaks Down HECM Requirements — It probably won’t tell you anything you don’t already know, but the trade publication provides a quick and easy breakdown of the hurdles that prospective borrowers must clear before receiving a reverse mortgage. The HousingWire story also features a critical quote from a director at AARP’s Public Policy Institute, who says the required hourlong counseling sessions aren’t long enough, and recommends that seniors do extensive research on their own before taking the plunge.

How Reverse Mortgages Can Fill the Retirement Income Gap — PlanAdviser.com gives a handy recap of the latest thinking on reverse mortgages as bigger-picture retirement planning tools, quoting professor and HECM advocate Wade Pfau as well as lenders and wealth advisors.

Written by Alex Spanko

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  • Comment on How Reverse Mortgages Can Fill the Retirement Income Gap — PlanAdviser.com

    Steven claims that HECMs can be placed on “mobile homes” which is false. Steven probably meant to say manufactured homes generally built after 1976.

    Steven also states: “Generally speaking, the value the bank will allow a person to borrow against their home [a]t age 62, the exact loan to value percentage is 52.4%. As people age, that rises: at age 72, it is 59.1%; at age 82, 67.4%; and at age 90, 75%. The reason for that is, ‘the older the borrower is, the lower their life expectancy.’” Yet he never mentions the impact of the expected interest rate.

    Steven goes on to say: “So, if a 62-year-old wants to retire but wait to collect their Social Security until they are 70 in order to receive the highest possible payment, …they might turn to a reverse mortgage and rely on that money in the eight-year interim” Yet he fails to present this as perhaps the worst use of HECM proceeds as to risk and the period of repayment. In most cases if repayment is made from the increased proceeds, those proceeds will generally not pay off the HECM balance due until the borrower is well over 80. On top of that if the borrower dies, the mortgage will become due and payable and if that happens before reaching 70 or the point that the additional benefits equal the amount of additional debt caused by this strategy, the borrowers lose (except in some marital situations). The time and amount of reward may not be worth the risk especially if the borrower is not in good health. This strategy should only be undertaken in limited situations.

    The author adds that Steve “the reverse mortgages he has overseen have actually grown 5% to 6% a year.” Steven than adds: “So if you are awarded a $100,000 reverse mortgage, a year from now that might grow to $106,000, and with compounding growth, 10 years from now that could potentially grow to $200,000…” Yet what is miss here is that a HECM line of credit grows not only through the interest rate but also through the ongoing MIP at an annual rate 1.25% but both are compounded monthly.

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