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Friday Round-Up: Walter’s Troubles, CFPB Slams Nationstar

The Ides of March proved turbulent for the financial industry, as President Trump’s proposed budget stirred fears of major impending cuts to the Department of Housing and Urban Development, and two players in the reverse mortgage servicing industry faced regulatory setbacks.

If you were too busy following the national financial firestorms this week, here’s a quick rundown of what happened in the reverse space and beyond, as illustrated by the top stories on Reverse Mortgage Daily:

Walter Reveals HUD Subpoenas Amid Gloomy Earnings Call — Walter Investment Management Corp. had a grim earnings call Tuesday morning; not only did the Tampa, Fla.-based firm report substantial quarterly and annual losses, Walter revealed a pair of HUD subpoenas regarding its Reverse Mortgage Solutions subsidiary’s origination, underwriting, and appraisal practices — including transactions dating all the way back to January 1, 2005. Walter’s stock has been in freefall ever since, with the folks at Seeking Alpha reporting a downside scenario that puts 50-50 odds on the firm entering some kind of bankruptcy protection.

CFPB Slams Nationstar with Record $1.7 Million Fine — Not to be outdone, Nationstar Mortgage took a $1.7 million hit from the Consumer Financial Protection Bureau over Home Mortgage Disclosure Act (HMDA) reporting errors this week, the largest civil penalty ever assessed by the CFPB over HMDA violations to date. The bureau didn’t specifically mention reverse mortgages in its announcement, but Nationstar services Home Equity Conversion Mortgages through its Champion arm.

Even with Positive Press, Pesky Reverse Mortgage Myths Persist — RMD spoke with reverse mortgage players from around the country about the myths that still pervade the industry and prevent potential clients from considering a HECM, including such timeless classics as: “Won’t I lose the house?” “Aren’t they only for desperate people?” And, of course, “Aren’t they really expensive?”

Trump Budget: Serious About HUD Cuts, But Details Scarce — The Trump administration promised massive reductions to discretionary government spending, and the White House delivered on Thursday with an austere budget that would slash $54 billion from a variety of agencies — including the Environmental Protection Agency and HUD — in order to fund substantial investment in the military. The president’s plan was light on nuts-and-bolts details, but confirmed the rumors from last week: HUD would face a $6.2 billion, or 13.2%, cut in funding from fiscal 2017 if Trump gets everything on his spartan wishlist.

Home Equity Levels Rise in Reverse Mortgage Hotspots — It may not be fully scientific, but the reverse mortgage origination hotspots of Washington, Oregon, and Colorado also saw the greatest gains in home equity between 2015 and 2016, according to new data from CoreLogic.

Reverse Mortgages Around the Web

Getting FHA Approval for a Condo — The Daily Herald, which serves the Chicago suburbs, includes an interesting HECM question from a reader in its financial advice column: A couple with no children wants to take out a reverse mortgage on their condo, but the association isn’t Federal Housing Administration-certified. The answer: Work with the association’s counsel to figure out whether or not the condo can qualify at all, and keep in mind that even with legal assistance, the property simply might not be eligible for a HECM loan.

Safety Net of Last Resort — Over in the Indiana Gazette, financial advice columnist Mary Hunt calls a the HECM a “safety net of last resort,” and specifically advises against using reverse mortgages in any circumstance other than need, citing high fees and rates of interest. “This is why you want to make sure you keep that option as your safety net or your last resort, not a means to get a pile [sic] cash the day you turn 62.” The piece notably does not mention the HECM line of credit option, though it does note that tapping into home equity “could be the difference between a joyful and peaceful end of life, and a season of misery for both you and your family members.”

Ever Thought of Buying a Home Using a Reverse Mortgage? — Steven Sless of Home Point Financial Corporation in Owings Mills, Md. takes to a real estate podcast to offer a detailed breakdown of the HECM for Purchase product.

Reverse Mortgages in India — RMD admittedly doesn’t know much about how reverse mortgages work in India, but this Q&A from the Khaleej Times — an English language paper in the United Arab Emirates — features a question from a reader in Bahrain whose mother lives in the Indian city of Bangalore and needs money to cover household and medical expenses. The paper advises the reader to explore a reverse mortgage on her house, under which she could receive payments monthly, quarterly, or annually. Interestingly, the Khaleej Times notes that the total amount of the loan, including interest, can’t exceed 40% of the home’s value, though the settlement process sounds substantially similar to the American system.

Written by Alex Spanko