Along with new hurdles introduced to the reverse mortgage business in 2018 – like a potentially difficult rule concerning second appraisals and the prolonged FHA approval process for condominiums – there also came new opportunities. Among these are the increasing prevalence of proprietary jumbo loans, and another rise in the HECM lending limit from the Department of Housing and Urban Development (HUD).
To put a cap on RMD’s coverage for the year, we thought we’d take a look back and present the top 10 most read stories that appeared on Reverse Mortgage Daily in 2018.
While a new appraisal requirement handed down by FHA was designed to stem HECM program losses to the Mutual Mortgage Insurance (MMI) fund, the rule’s implementation brought a mixed reaction from originators, particularly the requirement that only the lower of the two appraisals submitted to FHA can be used. Still, it’s easy to see why this story was the most-read for RMD’s 2018 coverage, considering its impact on the industry at-large.
Annual changes to the HECM lending limit always account for one of the year’s biggest stories on RMD, and this year’s was no exception. The HECM lending limit affects the way that the federally-backed reverse mortgage business is conducted, and the rise in the limit to $726,525 also represents the third consecutive increase, and garnered a positive response from the reverse mortgage business community upon its announcement.
Proprietary products represent a unique opportunity for the reverse mortgage business, and the release of a proprietary Home Equity Line of Credit product from Finance of America Reverse turned a lot of the heads of RMD readers when it was announced in late October.
An expected rise in mortgage interest rates for 2019 caused Zillow Research to forecast a reverberating effect across many different, major ways that consumers interact with the economy. Their researchers predict that such a rise will ripple through higher costs associated with both buying and renting housing, down through congestion in transportation that will affect the commutes of workers across the country.
The commissioner of the Federal Housing Administration revealed in October that the agency was actively exploring ways in which the HECM program’s losses on the Mutual Mortgage Insurance (MMI) fund could be mitigated, while also adding that the then-recently implemented second appraisal rule would be the least “impactful” of the options that FHA had on the table.
In order to illustrate the effects of 2018’s biggest HECM program changes, officials from the FHA took to the stage at NRMLA’s annual conference held in San Diego in October to present supporting data to the assembled reverse mortgage professionals attending the event. Among the information detailed in the FHA presentation included reduced endorsement volume, a rate of required second appraisals at 19 percent, and a confirmation of the fact that counseling certifications continued to outnumber endorsed loans.
Like the rise in the HECM lending limit that would follow, FHFA announced in November that it would be increasing the conforming loan limits on mortgages to be acquired by Fannie Mae and Freddie Mac for the third consecutive year. While FHFA has no authority over the lending limits tied to reverse mortgages, FHA has typically aligned them with the new Fannie and Freddie limits in previous years.
Finance of America Reverse (FAR) announced in September the introduction of a new product for senior homeowners who want to keep a low-rate forward mortgage in place, which added to the increasing prevalence of proprietary products being added to the wider reverse mortgage market.
Based on data in 2018’s edition of the annual actuarial review of FHA’s Mutual Mortgage Insurance Fund, the reverse mortgage portion of the fund continues to drag on the overall government-backed portfolio. While the loss was less than was recorded the prior year, the 2018 HECM value stood at negative $13.63 billion based on the report.
The FHA approval process for condominiums continues to present a problem for loan originators who have prospective clients interested in the HECM product, since an entire condominium community must be approved by FHA in order for a single resident to open a HECM.
Written by Chris Clow