HUD to Raise Premiums, Tighten Limits on Reverse Mortgages

The Department of Housing and Urban Development on Tuesday formally announced plans to increase premiums and tighten lending limits on reverse mortgages, citing concerns about the strength of the program and taxpayer losses.

Mortgage insurance premiums on Home Equity Conversion Mortgages will rise from 0.5% to 2.0% of the maximum claim amount at the time of origination. Those figures will be the same for all loans regardless of the initial draw amount, according to a presentation released by HUD; the premium for loans with draws greater than 60% during the first 12 months will drop from 2.5% to the 2.0%. The annual premium will decline from 1.25% of the loan balance to 0.5%.

The Wall Street Journal first reported the news Tuesday morning.

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In addition, the average amount of cash that seniors can access will decline from about 64% of the home’s value to 58% based on current rates, the WSJ said.

These changes are set to go in effect for all loans with case numbers assigned on or after October 2, one day after the start of the new fiscal year.

“Given the losses we’re seeing in the program, we have a responsibility to make changes that balance our mission with our responsibility to protect taxpayers,” HUD secretary Ben Carson said in a statement e-mailed to RMD. “Fairness dictates that future HECM loans do not adversely impact the overall health of FHA’s insurance fund, which supports the financing needs of younger, mostly first-time homeowners with traditional FHA mortgages.”

The HECM program’s value within the Mutual Mortgage Insurance Fund was pegged at negative $7.72 billion in fiscal 2016, and HUD noted that the HECM program has generated nearly $12 billion in payouts from the fund since 2009. The value of the HECM program fluctuates over time, however: In 2015, the reverse mortgage portion of the fund generated an estimated $6.78 billion in value; in 2014, the deficit was negative $1.17 billion.

Without this change, the Federal Housing Administration would need an appropriation from Congress in the next few years to sustain the HECM fund, the agency said in a fact sheet released Tuesday. Officials also told the WSJ that the drag created by reverse mortgages has prevented them from lowering insurance premiums on forward mortgages for homeowners.

“We can no longer tolerate putting American taxpayers and future generations of seniors at risk,” the agency said in the fact sheet. “Quite simply, the HECM program is losing money and can no longer remain viable in its present form.”

“The new upfront premiums recognize that all borrowers taking out a HECM, regardless of how much they draw upfront, represent potential risk and should contribute to the fiscal health of new business,” the fact sheet continues.

Carson echoed this sentiment in his statement.

“We’re taking needed and prudent steps to put the HECM program on a more sustainable footing so it can remain a resource for senior borrowers,” Carson said.

The announcement came with an accompanying mortgagee letter, 2017-12, that lays out the changes to mortgage insurance premiums and draw limits. HUD also released a chart showing the effects of the changes in select scenarios, as well as more exhaustive tables of principal limit factors that will become effective October 2.

The latest mortgagee letter is the second released in the last week; letter 2017-11, issued on August 24, detailed new servicing guidance as HUD prepares to implement the HECM final rule on September 19.

The move took the industry by surprise, with the WSJ reporting that leaders were not briefed on the changes beforehand.

David Stevens, president of the Mortgage Bankers Association, expressed support for the moves in a statement released Tuesday afternoon, calling them “moves designed to strengthen the FHA fund and lessen risk to taxpayers.”

“Reverse mortgages are an important financial product for our nation’s seniors, but the program needs to remain financially viable if it is to continue to offer its benefits into the future,” Stevens said.

National Reverse Mortgage Lenders Association president and CEO Peter Bell also released a statement in the afternoon, offering a mixed response that similarly lauded HUD’s decision to shore up the MMI Fund and described the move as a sign of support for the HECM program from the department. But Bell also expressed concerns over the effects on borrowers.

“On one hand, it reaffirms the secretary and department’s commitment to sustaining FHA’s reverse mortgage program for older homeowners while protecting the MMI Fund and taxpayers from future draws on the Treasury,” Bell said in the statement, which RMD received by e-mail.

“On the other hand, these changes diminish the benefit (amount of loan proceeds) available and increase the costs (increased upfront mortgage insurance premium) to most borrowers,” Bell continued.

NRMLA remains in the process of reviewing the new principal limit factor tables.

“We believe that there are alternative options for better managing the HECM program to reduce its overall costs and will continue to advocate for such beneficial changes to the program,” he said.

Written by Alex Spanko

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  • The reduction in ongoing FHA premiums is strategic as it will significantly limit the ongoing growth of the HECM’s Principal Limit (available funds), or what many refer to as the line of credit. This development will substantially change several strategies touted in recent years, such as the Standby Reverse Mortgage, and those seeking to use increasing available funds as a hedge against unexpected financial shocks in retirement.

    As reported, the average Principal Limit Factor will be reduced from 64% to 58%, an approximate 10% reduction in lending ratios.

    • SoundOfReason,

      Actually several of the currently promoted strategies have exposed the weaknesses of the program along with encouraging originators to “educate” seniors into making some very risky choices.

      The results of ML 2017-12 should further limit the broad and diverse uses of this product but at the same time provide greater protections to seniors and the MMI Fund.

      It is strange not to read some commenters saying that the changes will encourage proprietary reverse mortgage sponsors to create a product that can compete with the HECM. The reason may be that every time this has been claimed not once have we seen such offerings.

      • I sure hope it is a mistake in the tables. It’s going to be a lot more than a 10% decrease at today’s rate if these are correct. Currently a 75 year old would get 61.4% if rate is below 5.06. New tables show 51.7% at a rate of 4.37. That is a whole lot more than 10%

    • Investors will respond by offering lower margins to maximize PLFs and premiums to originators will go lower, possibly a lot lower. Business models will be forced to adapt or die. Welcome to the business newcomers!

      • Yes but lowering coupon yields on Hecm HMBS may force investors to put their money into higher yielding investments causing chaos in the secondary market for these securities.

      • Cynic:

        In the secondary market the term coupon yields refers to the interest that the hmbs pay to investors. Look at the Ginniemae hmbs guidelines for further clarification.Here is the definition:

        A bond’s coupon rate is the actual amount of interest income earned on the bond each year based on its face value. A bond’s yield to maturity (YTM) is the estimated rate of return based on the assumption it is held until maturity date and not called. Yield to maturity includes the coupon rate within its calculation.

        You can look look it here:

        http://www.investopedia.com/ask/answers/020215/what-difference-between-yield-maturity-and-coupon-rate.asp

        I know too much secondary market jargon for this forum lol!!

      • Abel,

        If you look at the second paragraph of your cited webpage, the coupon yield is literally talking about the yield on periodic coupon PAYMENTS.

        I have never heard of coupon yield in the context of a bond with no coupons. If this is the common language in the secondary market please find that language used in regard to a compound interest rate bond that does not pay interest until the principal is paid.

        Please stop forcing me to doubt the sophistication of your comments.

      • Cynic
        Read the Ginniemae HMBS manual.
        That will teach you the elements of securitization and perhaps the jargon (there is a double element of securitization with the Hecm market).Sorry but I have no time to teach. I have to originate lol!!

      • Abel,

        Ginnie Mae (the correct nickname for the Government National Mortgage Association, not ginniemae) calls their manuals guides. Chapter 35 of the MBS Guide dedicated to HMBS issuance has 2 references to coupons and 1 reference to yields but no reference to coupon yield.

        In reading the references to coupon, they have to do with Participation Rates, not actual interest coupons that are paid at dates other than the principal on the bond. Yield in the HMBS context has to do with index rates, not coupons.

        You seem lost and not wanting to show that you know little about the subject matter so you dodge substantive questions and requests for citations; instead you deflect. Not exactly a new tact but a disappointing one to say the least.

        It is OK but understand, like me, it is clear you are no master of secondary market subject matter which is especially shown by you excusing yourself to originate HECMs rather than issue HMBSs.

        I now understand to avoid your misuse of securitization and issuance jargon.

      • Greg,

        The question is: will investors be THAT accommodating? That seems very doubtful. At those margins, investors may require discounts and not pay premiums. This is common practice in the bond market.

  • The news is shocking and concerning for the future of the HECM program.

    Yes, in one way it does reaffirm the secretary and department’s commitment to sustaining
    FHA’s reverse mortgage program for older homeowners. Yes it should help protect the
    MMI Fund and taxpayers from future draws on the Treasury!

    However, what will be the effect to our senior borrowers? With the decrease in the amount of “Principle Limit” that will be available is going to further eliminate many senior homeowners from being able to obtain a HECM!

    This is very concerning and the timing is definitely not the best. With a slow down in endorsements, the changing times because of FA, this is not the news we need today!

    I am usually very optimistic but this news does not make me a happy camper today. I will get over it and realize the opportunities are still greater than ever out there for all of us!

    John A. Smaldone
    http://www.hanover-financial.com

    • I agree with you, John. If I am reading the new PLF figures correctly, On October 2nd, a 62 year old borrower will have a factor of .410 versus the current factor of .524. So, on October 2nd, a 79 year old will have about the same factor as a 62 year old today. I think this is going to make a serious dent in the HECM
      program.

  • The lack of stability in this industry is maddening. I can’t imagine trying to run a large organization that has to adapt to changes that are this severe. It feels like we re-write our marketing collateral every year.

    The new PL floor will kill HUD’s concerns about HECM to HECM refinances along with any concerns about reverse mortgage brokers/lenders earning too high of a yield. What’s the yield going to be on a 1% margin annual adjustable? That’s the margin it would take to have a full PLF this week.

    Can you imagine what will happen if the 12-month LIBOR (or our new index) hits 3-4%? At that PLF level, I wonder if the industry is sustainable.

    It appears that we are going to be paying for the sins of the past for a long time. Those fixed rate loans at much higher PLFs are going to be an issue for many years to come. Who knows how long it’s going to take to work through those losses. I hope HUD really considers reforming the way they handle the back end of the transaction to mitigate those losses.

    • Mr. Neumeyer,

      Your children will have been retired for years before the HECM portion of the MMI Fund can be turned around. Now the question is are we talking about HECM losses with the transfers from the outside sources of the Treasury and other MMI Fund programs or without them? Because without them the negative net asset balance of the HECM portion of the MMI Fund as of 9/30/2016 is $15.2 billion and with them $7.7 billion. That $7.5 billion difference is $1.7 billion from the US Treasury and $ 5.8 billion net from the other MMI Fund programs (generally FHA forward mortgages).

      It seems that what propelled these changes were the interim work done by the actuaries to begin deriving what the results for fiscal 2017 will be. It does not seem we will see a profit but a much larger loss for fiscal 2017 than what the actuaries projected it would be as of the end of the last fiscal year.

      If so many think living with secular stagnation was hard to accept wait until we see endorsements for fiscal 2018 and 2019. I must now push my estimate of getting back to 100,000 endorsements from 2022 out at least one decade longer and most likely
      considerably longer yet.

  • What baffles me is that FHA removed the low cost MIP option (yes higher inflows for the MMI fund and based on appraised value of collateral at origination) while lowering the residual inflows of periodic MIP premiums (based on loan unpaid principal balance). So there is plus – minus changes to inflows of the MMI relationship there. Why lower the periodic premiums if the HECM program risk to the MMI fund is increasing? If we had another down turn in home values there would be a drop on UMIP received while the future residual MIP would have been 100 basis points less than todays hecms periodic mip premium. Just doesnt seem to me FHA is preparing for another down cycle on home values on the hecm side.Just shaking my head.Will the secondary market react by lowering margins to accomodate higher PL needed to fulfill Gimaes pools (at 50% of endosements from the high end years and with lower PLF it just seems that somehow more loans will be needed to keep the secutarizatiom market going).On the other hand lower margins means lower yields to Hecm MBS investors who will put their money into other higher yield investments. Oh boy!!

  • Good points, except I don’t necessarily follow how a qualified borrower would be lower risk due to draw structure. Those folks like to pull their cash out in full too. Unless you are talking about T&I defaults or them keeping up with their home vs. letting it fall apart before the loan terminates.

    In my opinion. It should be a regional program with tiers of risk based on historical appreciation. States like CA would be tier one with the highest PLFs and lower performing states would be tier 2-4 with lower PLFs. You could even define it further by MSA, county, or city. To me urban vs. rural could be a risk tier based on what I’ve seen.

    The alternative is to create rigid reverse mortgage draw options, like tenure without the ability to go through a payment plan change. That type of offering should be very low risk to FHA at our current PLFs.

  • Thank you Mr Veale:

    I think the scenario that you propose drove Hud to lower periodic MIP is intriguing. I would like to know whats the percentage of loans originated at low UMIP vs the high UMIP which will tell us the universe of loans that could potentially be such scenario: loan with low UMIP and then with no tail hecm distributions till just before termination and with a full draw just before termination. This statistical event is a multiplication of 3 probability of events (assuming indepence which is not necesarily true) ie: low UMIP, little or no use of LoC and large draw just before termination. I would love to see the data but we know that tail Hecm distributions are growing quite a bit based on hecm mbs market so I assume that the rate of LOC utilization is not small on average. Hud receives the periodic MIP from the servicers during the life of the loan if I am not mistaken so as a matematician I say the probability of this scenario should be low. The data has the final word but I say not enough time has passed since 2013 to know statiscally how many loans would be in this category because the average span of a hecm was 7 years to termination (whether a refi etc). Lowering periodic MIP cannot help the inflows to the MMI fund in any instance. On a separate topic My take is that the decision is more political (lower total rate of interest plus periodic mip rate) to softnen the blow of removing the low UMIP. There is a change in paradigm at HUD and this change is telling us that Hud believes FA is either not working enough or was a failure for FHA attempt to “fix” the Hecm program. Two years is not enough time in my opinion to know if FA has achieved its goals statististically. Plus with the last two-thre years increase in home appreciation I would think that the blow to the MMI fund should have been softened for Hecms originated in 2008-2010 and terminating now (may still losses but not as dired as predicted in the actuarian reports). In my opinion I have always contended that the original probabilitic model accounted for the long term behavior of home appreciation cycles and Hud simply went with short term fixes that never allowed the model to work over the long time with the full ups and downs of the home appreciation behavior.

    • Mr. Torres,

      Without data, mathematics is not relevant. I was also a math major in college before switching majors as a senior. Also the initials used by HUD for upfront MIP is IMIP (initial MIP). What is relevant is logic which is not pure math.

      The strategy you speak of with three separate probabilities is relatively new as to a commonly presented sales presentation. Also financial advisers are just catching onto the idea.

      As to lower IMIP originations, we know that almost 90% of all originations are adjustable rate HECMs. Few if any fixed rate HECMs are originated at the lower IMIP. Further in discussing the success of its first year’s disbursement limitation rule HUD announced in NRMLA meetings it is satisfied that so many adjustable rate HECMs are being originated at the lower IMIP and that few of these originations take full draws after 12 months. As to specifics, reach out to your sources at HUD.

      Please explain what financial assessment has to do with the massive losses projected by the actuaries. Financial assessment was written to slow the rate of property charge payment defaults and their related foreclosures. It was never intended to reduce losses that reach the due and payable status because of other defaults; it is those losses that are harming the MMI Fund to any great extent. It was the defaults other those related to property charge payments that were addressed in the changes on April 1, 2013, September 30, 2013, August 4, 2014 and now to go into effect on October 2, 2017.

      Confusing the financial assessment change with the other changes is a common fallacy in our industry but financial assessment will have little if any impact on the loss situation in the MMI Fund. Financial assessment has more to do with reputation risk of lenders and FHA than the financial risk of the MMI Fund.

      The original model did not exclude fixed rate HECMs nor did it have the moderate Saver PLFs. Worse it expected a 4% annual average national appreciation rate, while today’s rates is much closer to 3% and the new PLF table to less than 3%. So again I question on what basis your reach your conclusion. As in Geometry, please supply a proof of your contention.

      • Let me explain:
        Where are you getting data indicating that most of new HECMs have low UMIP premiums? Data please
        We do know 90% of originations are hecm adjustable but we dont know the ratio of high to low UMIP of those.
        Tax and HoI technical defaults can have disastrous consequences for the MMI fund because tax liens by county/city municipalities are superior liens and can be enforced thru tax sales without regards for the balance that may be owed to the mortgagee. For example say a borrower fails behind say $20k in back property taxes and the reverse mortgage balance is $200k, the tax authority can foreclose the property for $20k and satisfy the tax liability of $20k leaving the mortgagee and possibly HUD out to absorb the $200k loss. On the other hand on the scenario you describe in which the todays collateral value does not exceed the outstanding loan balance, the mortgagee will excercise the foreclosure sale and attempt yo get as high a sale value as possible (say $150k as an example) so the loss to HUD will be $50k instead of $200k. It is the superior lien status of property tax liens that overrides the seniority lender liens by recording date order that can contribute to such huge losses on enforced tax sales. This is why FHA put such enphasis on tax defaults because the agency views foreclosing on seniors as a terrible PR outcome and will prevent servicers on most cases to proceed with such sales but the federal gov doesnt have the legal authority to stop property tax sales defaults by municipalities. At the end a tax default is by statue supposed to be an accelaration clause just like any other triggering event that makes a loan due and payable. So the link to FA is there relating to minimizing the potential losses to the program.
        On the upside question: looking at a snapshot in 2010-2013, many homes had lost significant value but they have rebounded quite a bit last two years. Dont you think that the losses due to termniation of upside down loans have at least been tamed? It is the sales value at termination vs loan balance that determine the size of losses (plus expenses). There is also the real estate trend in certain areaswhere home values are between $625k-$1+M today and even those fixed rates were originated with 62-90% PLF based on $625k max so plenty of room for interest to accumulate and still not have a loss.
        As for 3% home appreciation you cite, what sources are you citing and whats the time cycle for averaging? At longer cycles like 10-20yr the historical value is 4% not 3%. Now a good question would be: if you want to use 5-10 yr cycles for home appreciation then the expected rate should be more representative of the horizon so a 5 yr libor swap or other shorter term index should be used to match the lower loan life expectation.

      • Mr. Torres,

        For someone who claims to be a mathematician, checking out 4% versus 3% annual appreciation is a matter of running numbers. Don’t you know how to discount cash flows? Do you understand the principle of how much do you have to put into the bank to have $100 after 15 years at 2% (all pre-tax) compounded monthly? This is no greater than junior high math.

        Here is how a college senior in math explains it. You run the numbers on the amortization table. Then assuming loan termination occurs at life expectancy per the TALC life expectancy tables, you find the principal limit on that date. The estimation theory is the principal limit equals the value of the home at life expectancy. So you take the MCA as the initial home value, your number of periods equals TALC life expectancy in years, your future value is the principal limit at TALC life expectancy, and you compute for the interest rate. I just did it for a 65 year old, using a 5.06% expected interest rate targeting 10/1/2017 as my close date, ran the amortization schedule as if a fixed rate H4P (full draw). The result was the expected about 3% appreciation rate. Using that same computation in 2008, the appreciation rate worked out to be about 4%. The reason for it not being exact is that HUD throws a small percentage in for fix up costs at termination, etc. since not all terminations cost HUD anything. I expect a self proclaimed mathematician to be able to do this seventh grade math computation. Why a mathematician could not figure that out on his own is beyond me.

        Your historical context is rather old and does take into account adjustments in PLFs since 10/1/2009. You seem very lost about appreciation rates since 9/30/2009.

        Next we come to property charge payment defaults which include insurance. Since when does MIP cover property charges when the loan is in active status? It is up to the servicers and lenders to cover that except for periods of time that HUD mandates suspension of foreclosure.

        Now to losses in the MMI Fund. All HECMs covered in the MMI Fund were endorsed after 9/30/2008. So all but a small percentage were appraised at post recession values. The Fund was not in anyway harmed by the first huge home value losses of the mortgage meltdown/Great Recession. Once again I have trouble with a mathematician getting so lost in irrelevant minutiae.

        The actuaries who are actual mathematicians show losses on all books of new business from fiscal 2016 through 2023 and the negative net asset position of the MMI Fund going from $7.7 billion to over $12 billion in that time frame. So again you being a mathematician I do not understand all of the focus on years before fiscal 2014. Rather than looking at the numbers in a disciplined fashion you are simply guessing about the interest needing room to grow etc. See Page 18 of the fiscal year 2016 HECM actuarial report which is located at:

        https://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/rmra/oe/rpts/actr/actrmenu

        Then at the beginning of your last comment you demand I provide data where I stated that I believed a presentation at a NRMLA conference covered the issue of the success of the initial disbursements limitation. I do not and have not claimed I have the data. So why don’t you do the simple thing and ask NRMLA if they have an audio of that presentation. If you don’t to call NRMLA or they cannot locate that info, ask your peers, or write HUD directly for that data. I have things to do other than respond to your demands. Unless you are paying for my consulting services, since this is not the first time you have demanded I provide things for you, I will not be responding to your comments of this kind.

      • Mr. Torres,

        Despite my reluctance to do so, the data on the IMIP is in the actuary report on the HECM portion of the MMI Fund for the fiscal year ended 9/30/2016 on pages 38 and 39. Note that the data is only partially complete for fiscal 2016 since the overall schedule was drafted during interim field work for that year’s report when only the portion presented was available.

        Ms. Karin Hill of HUD referenced the schedules in the address she made at the NYC Eastern NRMLA Conference on April 11, 2017 as noted by RMD at the following URL:

        https://reversemortgagedaily.com/2017/04/11/hud-discusses-the-state-of-the-reverse-mortgage-in-2017/

        In the future if you want to engage in a thoughtful discourse, please make sure you do your homework. It is frustrating when a self-proclaimed mathematician will not use the model he hypes to find the current appreciation rate used in that model. Instead you insist that historical information says otherwise. That is hardly a way to carry on a logical discussion about a current variable.

        I know of no publicly reported tracking of cumulative draws after closing that would provide the information you are seeking since it does not involve IMIP. BUT it could be in the actuarial report in a section I have not delved into. HUD may have it but you need to do some work as well. I cannot and will not waste my time handing you everything you want on a silver platter. You have to put in some effort as well or don’t engage. Stop giving us your views and try to contribute. The property charge default issue has been discussed again and again so why write paragraphs on it when you Google it and learn about it? If it sounds like I am upset….

  • In my view this is a forced interest rate change. I have no experience in dealing with HUD so I do not know how deep their thinking is. Is it as deep as looking at the majority of the funded loans and realizing most have maxed out margins while staying under the expected?

    Or is it that someone figured out that less interest being paid out on upside down loans is obviously more then than the current upfront mip and monthly mip can sustain?

    I am all for making money but the current pricing has brought out a lot of bad apples and inexperienced loan officers to the industry. Lenders are selling their brand name rather than offering competitive terms. The Reverse Mortgage has always been a rapport and needs based sale and unfortunately seniors do not shop around for the right offer. In my experience this generation can be loyal to a fault.

    How do you sell someone who is willing to take poorer terms because they have already built a relationship with that BANK we all compete against. I see it every month and I have been doing this a long time. It used to shock me but now its par for the course.

    So my questions is does HUD realize a lot of these home owners are not securing the best terms for themselves and attempting to force lower rates or this is just a strategy to combat interest?

    I personally feel pretty good right now. The top Reverse Mortgage Companies will either have to sell a much higher margin to off set their very expensive marketing budget. If they continue to try and run business as usual its going to be hard for the borrowers to ignore the difference in cash. Or lead prices come down and we stop getting gouged by Lead Vendors.

    Good luck its not the end of the world.

  • JD,

    Your comment is very marred. As to the MMI Fund there is not a single HECM endorsed before October 1, 2008 accounted for by the MMI Fund, NOT one. All HECMs endorsed before October 1, 2008 are accounted for in the General Insurance Fund of HUD. So why does the housing crisis figure so prominently in your analysis?

    The second point is no insurance program in HUD is designed to be anything other than breakeven. The HECM portion of the MMI Fund is hurt because of so many fixed rate Standards and slow growth on property values throughout the country.

    So while your ideas may be exceptional, they simply do not apply to HUD since their motive is much different than that of lenders.

  • After having a day to digest and analyze the changes, I think there may be some small silver linings. But there are always unintended consequences of regulatory reform. For example, as Matt N stated earlier, if volume of good loans declines, you may not have enough new MIP revenue coming in to mitigate losses from bad loans.
    Removing the 5% floor and requiring lower lender margins to provide acceptable PLFs may seem like a good idea for the borrower. However, you’ll find that lower expected rates will also have higher LESA set-asides, lower Tenure Payments, lower LOC growth, and will reduce the ability to use premiums to off-set closing costs.

    • Ummm not to mention lenders will have to charge max fees to make money. The servicing fee will be back as will full origination fees. And the secondary market may just decide there is a better place for them to invest than loans with a 1 point or less margin.

    • As a taxpayer I applaud the actions of Dr. Carson but as a HECM originator I do the opposite. As a senior consumer advocate, again I applaud the actions of Dr. Carson but as someone who wants to develop the use of reverse mortgages in financial planning, I deplore what he did.

      It is time to settle down, stop appealing to the financial community, adjust marketing strategies, and return to the proverbial drawing tables. We once mistakingly over used HECMs to try to keep seniors in their homes when they were ill financed even to meet property charge payment requirements starting with the day following 12 the month period after loan closing. We now find an overemphasis of trying to appeal to what we call financial planners when in fact most are nothing more than asset managers who want to see their client’s asset bases increase. Many in our industry have done little more than appeal to their commission based revenue stream.

      This is a chance for a fresh start. What we do with it says a lot about what we have declared about our commitment to meeting the needs of seniors. Will we happily move forward or grind our teeth doing it? The test is here, how are we doing?

  • Matt,

    What you forget is that the actuaries are predicting losses on all new books of business from fiscal 2016 to 2023 of over $4 billion. $1 billion of that comes from the new HECMs endorsed in fiscal 2016.

    I do not agree with your explanation since losses appear to be flowing out even new books of business. HUD is in NO way trying to RECOVER losses from old business but from the book of business for fiscal 2018. What I am dreading is seeing the revised losses for fiscal 2016 and 2017. HUD is getting that information on a preliminary basis from the actuaries as they delve into their field work in the interim portion of the their engagement for the current fiscal year.

    Termination losses are not just confined to fixed rate HECMs of the 2009-2013 vintage. See page 18 of the actuarial report on the HECM portion of the MMI Fund for predicted losses on new books of business through 2023. You will find it here:

    https://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/rmra/oe/rpts/actr/actrmenu

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