Voice of Housing - All Comments

re: Reverse Mortgages Get Special Attention from Federal Investigators

Beth Paterson — Fri, 12 Mar 2010 03:10:24 GMT

Frank, thanks for your comments. I just did a post this week regarding the protections including the counseling, titled "You Need To Know Reverse Mortgage Borrowers Are Highly Protected!" Regarding the costs, I have a post doing a side-by-side comparison titled "Reverse Mortgage Costs - High or Mythical?" You're right, the additional benefits of the FHA Mortgage Insurance Premium outweigh the cost. These include guaranteeing the funds are available for you; guaranteeing the lender against default or shortfalls which means the interest rates are lower (currently under 4%) compared to other mortgages; providing a line of credit growth rate (available only with reverse mortgages); and Insuring as a reverse mortgage it is a non-recourse (no personal liability) loan. I agree that the misconceptions stem from the forward lending/subprime issues and their perceptions that reverse will be the next subprime. Unfortunately they haven't gotten the facts before printing the misleading articles. I think Joe does a great job in addressing this and also working on providing the truth about reverse mortgages. I appreciate your recognition of my educational efforts also.

re: Reverse Mortgages Get Special Attention from Federal Investigators

Frank Ceizyk — Tue, 09 Mar 2010 21:19:41 GMT

Beth, Read some of your blogs--well done. One thing I didn't notice you drive home is the fact that there is 3rd party nonprofit counseling required as part of the program. I think this gives seniors an added layer of protection against abuse, pressure sales tactics and scams. While I can't quite wrap my brain around the idea that the costs are not high...I think the consumer benefits outweigh the additional costs. The media misperceptions certainly have to stem from the fact that this is a no income qualifying loan with no real credit requirement...so the media folks who've had it drummed into their heads during the subprime meltdown that the borrowers were preyed upon to make loans they couldn't repay, don't realize that a monthly payment obligation is not applicable to a reverse mortgage. Keep up the education efforts...

re: Reverse Mortgages Get Special Attention from Federal Investigators

Beth Paterson — Fri, 05 Mar 2010 02:07:15 GMT

Joe, thank you for this article and support of reverse mortgages. Unfortunately there are a lot of misconceptions about reverse mortgages spread by the media and politicians. People seem to want to read and then believe the misconceptions rather than the facts. You are right we need to work together as a team with lenders, originators, associations, senior advocacy groups and politicians to share the facts and the value of reverse mortgages. I blog to help overcome the misconceptions and provide the facts yet so many people still overlook the facts. As my one blog article is titled, "Is Your Opinion of Reverse Mortgages Denying Seniors?" So many people's opinions of reverse mortgages do deny seniors because they don’t have the facts. One of the big misconceptions is the closing costs being high. It's an eye-opener once I share a comparison to conventional loans (the difference is the FHA Mortgage Insurance Premium). Reverse mortgages don’t have the option to buy down points. Ray J you have a misconception that the lenders are "making 5 points on the deals...with 8% interest rates..." In fact HUD regulates the fees (markups are not allowed) including the origination fee. The origination fee is 2% of the first $200,000, 1% thereafter with a cap of $6,000. Interest rates on the HECM HUD insured reverse mortgage have historically been lower than conventional loans, 5.56% fixed and under 4% for the adjustable rate. Again, Joe, thank you for your support of reverse mortgages. They are not right for everyone but they sure change the lives of our seniors giving them security, independence, dignity, and control and choices.

re: Reverse Mortgages Get Special Attention from Federal Investigators

Frank Ceizyk — Thu, 04 Mar 2010 18:16:11 GMT

Bones--the reverse mortgage product has a built in requirement for HUD certified counseling meeting before proceeding with the app. This provides a 3rd party protection from a not for profit financial counseling entity. This pre-app counseling should provide more security for the borrower than the average loan product--the danger is if a proprietary rev mortgage product rolls out with no counseling requirement. Ray--if you figure in ufmip of 2.25% & 2% ave origination charge, you are at 4.25% effective cost--add in title/appraisal/lender fees and you get close to 5%--add in the monthly MIP and it is an expensive loan proposition--so clearly outlining the cost/benefits based on borrower needs is essential for this to be successful for borrower.

re: Reverse Mortgages Get Special Attention from Federal Investigators

jdr — Wed, 03 Mar 2010 23:17:32 GMT

Ray J: There are no 5 point/8% HECM programs! The origination costs AND interest rate are set by the FHA, and are the same regardless of lender, area of the country, etc. I agree that AARP should help with this - properly used, it's terrific policy.

re: Reverse Mortgages Get Special Attention from Federal Investigators

Charles Lee — Wed, 03 Mar 2010 15:26:23 GMT

I think that it is a god program that needs more exposure

re: Reverse Mortgages Get Special Attention from Federal Investigators

Bones 322 — Wed, 03 Mar 2010 13:55:47 GMT

The problem is when you have an old guy that has no clue that his Medicaid or State Benefits become endangered if he takes cash from a HECM and puts it into an account. The product is just fine as long as you have originators that are educated on the subject selling it. Line of Credit is probably your best bet so that you don't put your medicaid or State Benefits at risk. Also, consult your family and have an expert intervene before you agree to do anything. Several opinions are better one. Again, if used properly this can be a great program.

re: Reverse Mortgages Get Special Attention from Federal Investigators

Ray J — Wed, 03 Mar 2010 00:20:57 GMT

The problem is probably the guys making 5 points on the deals...with 8% interest rates...

re: Reverse Mortgages Get Special Attention from Federal Investigators

Frank Ceizyk — Tue, 02 Mar 2010 23:38:34 GMT

Joe--this really suprises you? This is a no income verifying, equity only, negative amortizing loan program with basically no credit requirement. Sounds vaguely familiar--subprime/Option ARM anyone? As housing values continue to hemmorage under the pressure of foreclosed inventory, isn't it logical that a purely equity based no income/no credit requirement loan program might not be something any politician in his right mind would want to get behind? Granted you outlined the benefits, but you've got to wonder what the abuses are if FinCEn is suddenly so interested in how this products is being sold. Perhaps the public is rightly wary of another "ingenious mechanism we can't afford to squander". For a financially educated consumer, the pick-a-pay loan was an ingenious mechanism...but these were sold to far too many financially uneducated people on a false economic premise: that house values would keep going up and refinancing would be easy. Maybe a financial education campaign explaining the borrower benefit of this program along with details about tthe 3rd party nonprofit counseling safeguards that are built into the program would make this sound less like another commodotized mortgage sales pitch for what regulators are obviously concerned is the next predatory loan product.

re: GSE's Decision to Purchase Delinquent Loans Forces The Question: Who Will Investors Believe Now?

Brian O'Reilly — Fri, 12 Feb 2010 15:52:36 GMT

All good points: 1. The US deficit is an issue to long-term growth and stability; but by the same token - stimulus is required to continue priming the growth engine. The challenge will be striking the right balance regarding when to pull back, how fast and how much. 2. And yes, buying out loans at 120+ is the right action - but the BIG question in the future - is what are the impacts to the GSEs going forward in the absence of continued government support. How is investor confidence in the GSE (or what they become) restored. I believe we all agree that they (or what they become in the future) will be vital to a strong US Housing finance inductry. 3. And regarding Congress, I could not agree more - 1) absolute transparency of the fully loaded cost of all government actions is essestial, especially given the issues relating to the US debt, and; 2) its time Congress stopped writing checks we can't cover!

re: GSE's Decision to Purchase Delinquent Loans Forces The Question: Who Will Investors Believe Now?

MisterVA — Thu, 11 Feb 2010 22:54:48 GMT

Too bad there wasn't any TARP money to purchase them. You remember. The funds that were earmarked for the Troubled Asset Relief Program.

re: GSE's Decision to Purchase Delinquent Loans Forces The Question: Who Will Investors Believe Now?

David Jeffers — Thu, 11 Feb 2010 22:36:29 GMT

Brian: When lawmakers take up the challenge that you pose, they will have to face an uncomfortable question: Is Congress ready to accurately estimate the impact of putting on the budget the full cost of the mortgages needed to keep the industry functioning? Meaning: enough to finance Realtors' 6.5 million annual sales and home builders' 750,000 sales? Just how much housing activity can the fed government afford in our brave new world? Inquiring minds...

re: GSE's Decision to Purchase Delinquent Loans Forces The Question: Who Will Investors Believe Now?

Barry Zigas — Thu, 11 Feb 2010 22:10:07 GMT

Loans that are 120+ days delinquent should be bought out, and investors have to suck it up. F and F can now take measures to help out the homeowners where possible and do what they can to help stabilize neighborhoods and markets. Would but the USG would move to force the sale of delinquent loans in PLS so they could be resolved, as well. UST Secretary Geithner's report on the TARP program now projects that the USG will more than earn back what it has invested in the GSEs. Plus they've gotten a functioning mortgage system, long-term fixed rate terms for consumers, and 2 big enterprises to help them steer an important policy course. I'd say they've more than gotten their money's worth.

re: GSE's Decision to Purchase Delinquent Loans Forces The Question: Who Will Investors Believe Now?

Jason Harris — Thu, 11 Feb 2010 16:40:22 GMT

Brian, Our deficit stinks...but when you take in perspective that most of Europe and the industrialized world is in a similiar boat I think it mitigates things a bit. As for why Asia doesn't push us into "recievership"...they are export driven economies. There is an old saying "You don't cut off your nose to spite your face". They are in a situation where they need to support our economy or they will have no one to buy their widgets. If the Chinese people ever become prosperous enough to buy there own goods, we could be in trouble. The trouble is if China wants to be the worlds widget makers they have to keep paying their workers scraps. Not a great startegy to stimulate consumption... We certainly need to move in the direction of reducing our debt...but not until this recession subsides. You might ask Japan how pulling back on stimulus during a recession went for them. Many Japanese economists actually believe we are heading towards this mistake and are shocked we haven't learned their lesson. In a truly unstable global environment, money stills flows like water to buy our debt. Not sure how long this will last, but it certainly tells you most of the world still likes our long term chances, or at least has no better place to park their money whne the sh%t hits the fan.

re: GSEs to Purchase Delinquent Loans Forces The Question: Is This The Real End of Fannie and Freddie?

Brian Como — Thu, 11 Feb 2010 15:44:57 GMT

"To be sure, yesterday’s action by Freddie Mac comes only as a result of the US Treasury’s guarantee of both GSEs’ financial obligations. Let’s not forget, by all measures both institutions are insolvent, and in the absence of the government’s intervention and guarantee, they would be unable to function as going concerns." Let's also not forget that the US is basically insolvent, so we are backing up the GSE's financial obligations by spending more money that we as a nation don't have. It's a wonder certain Asian Nations don't force us into receivership. Not sure exactly how the GSE's function as a going concern with the backing of a nation with such a huge deficit?