Bank Investment Consultant recently published a new article about the recent changes to reverse mortgages. The article, written by Howard J. Stock writes about H.R. 3221: Housing and Economic Recovery Act of 2008 and what it means for the reverse mortgage business.
While it has taken a while for the laws to become effective, the article points out that the subprime crisis and its catastrophic effect on the economy have clearly taken precedence. "It’s a busy time for Federal regulators dealing with housing," notes Peter Bell, president of the National Reverse Mortgage Lenders Association in Washington, D.C.
Even with the financial crisis upon us, it’s still expected that the new laws will have a positive effect on the reverse mortgage business. According to the latest report from the NRMLA issued Oct. 14, the industry closed 112,100 home equity conversion mortgages, or HECMs, in the fiscal year 2008, which ended Sept. 30, surpassing the record loan volume of 107,558 for fiscal year 2007.
Bell predicts new higher maximums will only fuel this fire, creating a "surge of activity" as people look to home equity as a source of retirement income. While lenders like Bank of America have been closing loans with the new loan limits and lower fees prior to the mortgagee letters, everyone is now closing them.
While HUD has allowed this activity, it wouldn’t insure those loans until the Mortgagee Letter went out. The department allows 60 days to register for that insurance, so lenders are hypothetically only assumed a small risk-investors such as Fannie Mae won’t buy a loan that isn’t insured. But even if it delayed this guidance beyond 60 days, HUD can still decide to cover a loan on the merit of its claim.