WaPo: Proprietary Reverse Mortgages Worth a Look

As federally backed reverse mortgages volume has “tanked” during the last fiscal year, new proprietary reverse mortgages are a viable option for seniors interested in these retirement loans, housing columnist Kenneth Harney wrote recently in the Washington Post.

In his column “New Options Open for Homeowners Seeking a Reverse Mortgage,” Harney tells readers about the latest private products from Finance of America Reverse, Reverse Mortgage Funding, Longbridge Financial and One Reverse Mortgage.

“All of them allow much larger maximum-loan amounts than [Federal Housing Administration]. They also charge no mortgage-insurance premiums, and may permit loans to owners of condominium units in developments that have not been approved for FHA financing,”  he writes.

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He mentions FAR’s latest HomeSafe Second, which is the first and sole second-lien reverse mortgage on the market, allowing borrowers to keep a low-rate traditional mortgage in place, and FAR’s desire to create products that offer “homeowners nationwide more flexibility and innovation than FHA can.”

“Other companies’ proprietary offerings have their own special niche features designed to improve on FHA’s rules: Equity Edge’s program lowers the eligibility age for some borrowers to 60 instead of 62; One Reverse Mortgage permits loans on houses with solar panels, to cite just a couple of examples,” he writes.

Because proprietaries may have limitations like more thorough credit screenings or lower maximums of available equity, Harney writes that the proprietaries have their drawbacks.

“Generally, they are not aimed at the lower-to moderate-cost housing market like FHA, so they screen out potentially large numbers of owners from coverage,” he writes, and said they should be discussed with a financial counselor.

“Bottom line: They’re an important, growing resource for senior homeowners and worth at least a look if you’re considering a reverse mortgage,” according to the column.

In his explanation of how the last rough year for Home Equity Conversion Mortgages has set the stage for proprietary creation, Harney explains the October 2017 rules changes and the latest appraisal process retooling — and the low volume that has followed.

“The program is a financial nightmare for the FHA, performing so poorly that the FHA’s commissioner, Brian D. Montgomery, complained recently that it is ‘still hemorrhaging money,’ despite repeated reform efforts,” he writes.

Read the entire story at the Washington Post.

Written by Maggie Callahan

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  • “As federally backed reverse mortgages volume has ‘tanked’ during the last fiscal year….” For fiscal 2017 HECM case numbers assigned were 75,797 yet (even though HUD has yet yet to report case number assignments for September 2018), total case number assignments for fiscal 2018 is expected to be less than 51,000. We have not seen a count that low since fiscal 2004 when it was 44,465; however, the case number assignment count for fiscal 2005 was 65,917 which is lower than that count for any fiscal starting with fiscal 2006 and ending with fiscal 2017.

    So on a national level, senior demand for HECMs dropped about 32.72% during fiscal 2018. At a 64% conversion rate, if HECM applications with case numbers assigned were endorsed in the same month as they received their case number assignment, then there would have only have been 32,600 endorsements. Thank goodness for the case numbers assigned in September 2017 of over 20,400 and the three months before that so that the endorsement count for fiscal 2018 turned out to be 48,379.

    What is good news is that August 2018 (the last month for case number assignments that HUD has posted) was the highest total for case number assignments of 4,978 with hopes that September 2018 case number assignments will exceed 5,100.

    As to the HECM portion of the MMIF hemorrhaging money, that is a topic beyond my pay scale but this year’s annual report to Congress on the fiscal condition of the MMIF should shed light on that topic

  • I never like the word “Tanked”! It gives a negative feeling all over! Yes, we took a dive during the last fiscal year, but we are not “Tanked” yet! In fact, there is still a lot of life to come back with the HECM!!

    I do agree with George Owens figures and statistics, no doubt about that. I also agree that the proprietary products offer a lot of opportunities to tap into much higher valued properties as well as to fill many gaps the HECM can’t fill.

    I actually feel the propitiatory products will help the HECM in the long haul!

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

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