The National Consumer Law Center, (NCLC) an organization that I had never heard of before came out with a horrendous, ridiculous "report" about Reverse Mortgages entitled "Subprime Revisited."

The title alone lets you know what they think. I read the entire report and I had to struggle to keep my lunch down. I have never read a more biased, one-sided and in several cases, erroneous, report on the subject in my life.  

The twenty page report makes a few feeble attempts to show that there actually are some benefits to Reverse Mortgages, but it's overall tone, absurd omsisons and predisposed rhetoric and case study examples are completely unnaceptable. Here are a few of my favorites:

1) The report does not even bring up the simple fact that shows that well over 90 percent of Reverse Mortgage borrowers are happy. That statistic alone, in light of the horrible satisfaction rates of other financial products, speaks volumes that were deliberately omitted.

2) The report writes on page 2 that borrowers "must own their home free and clear or with a minimal amount of outstanding liens." Even the most basic research would prove this to be incorrect. I just closed a Reverse that paid off a $400,000 mortgage, is that minimal?

3) Page 2 "Propietary Reverse Mortgages lack even the basic Federal Consumer protections that apply to HECM loans" This is ridiculous because A)There is only one propietary product available today from one lender, and B) counseling is required for that loan as it has been for all propietary products taht used to be available. What other protections do they mean?  

4) Page 3 "HUD guarantees that the lender will be repaid, up to specified limits" Wrong again; HUD will make the lender whole no matter what.

5) Page 3 "Congress has capped the origination fee (and) banned the selling of other financial and insurance products, While these statutory requirements provide important protections to borrowers, they are unlikely to counteract the market forces that drive inappropriate or abusive lending"  That's a big prediction, care to back it up with any evidence?

6)Page 7 "The same forces once at work in the subprime market are now growing in the reverse mortgage market. Competition in the reverse mortgage market is heating up, with more than 2,700 lenders offering HECMs. According to a recent GAO report, more than 1,500 lenders originated their first HECM loans in 2008. The combination of increased competition, volume-generated profits, and the vast number of potential reverse mortgage borrowers is a recipe for inappropriate and abusive reverse mortgage lending" 

HOLY CRAP! do any of those "ingredients" contribute to the suggested result? Competition, more clients, volume generated profit?!?!? Those apply to any growing industry. What a shameful example of bias and predujice.

 7) Page 8 In the middle of just one of several exmples of unhappy Reverse Mortgage borrowers (without one example of the 96% of the borrowers that are happy), they write that Creighton Collins had to pay "$1,600 in charges to verify the title of the house he had owned for decades" That's lovely, but it shows more ignorance by the authors because  title is required on any mortgage loan, forward or Reverse, no matter how long you have owend it. I would think any attorney would know that.

8) Page 8 -"Claims by Lenders that they will protect the interest of consumers in the lending process should be approached with caution. Without effective regulation, abuses are likely to occur in the lending process." Nice...very objective.

9) Page 9 "The agenda for a recent gathering of reverse mortgage lenders warned that "it will not be long before fraudsters develop schemes to expoit seniors and lenders" Take a closer look.. This was a Reverse Mortgage lenders conference (that I attended). What other industry polices itself like this? Do you think you would hear this in another industy's own convention?

10) My favorite: I almost couldn't bear to type this one out Page 10-11 "Seniors, especially those with low incomes, are hard-pressed to find knowledgeable and trustworthy advisors. (??) On the other hand, they can expect to recieve lots of encouragement to take out reverse mortage loans. Unfortunately, much of that encouragement comes from a cast of characters eerily familiar from the subprime mortgage boom and bust: aggressive brokers eager to take in large fees and giant financial institutions hungry for profits that come form maximizing loan volume. In an effort to generate a steady stream of borrowers, seniors are likely to be pushed into reverse mortgages that they do not need.

WHAT?!? Why can't seniors find someone that they can trust? instituitions looking for profit is a bad thing? Where do they get off saying that borrowers (especially low income borrowers) are taking  reverse mortgages that they don't need? I want to vomit.

11) Page 11  " a list of 25 ways to use loan proceeds recently posted on a reverse mortgage promotion web site includes "take a dream vacation" "Go on a cruise" or "travel around the world" Also on the list at number 19 is Lifestyle Enhancement"

Are these bad things? What were the first 18? Let me guess: Pay off your mortgage? Get the medication you need? Eat three meals a day? Have heat in the winter? Ridiculous. If people want to use RM proceeds to travel, why not. My clients have been using them for their day to day necesities. Where is the mention of that?

12) Page 11 Same idea "Urging these seniors to cash out home equity to go on a "shopping spree" or purchase a "dream car" exposes them to the danger of having nowhere to turn to raise money for future financial emergencies.

ABSURD! First, I have never seen anyone shop for anything other than what they needed with their RM proceeds and the car that one of my borrowers bought was far from a dream car, but it let her get to the doctor without worrying about breaking down on the Highway, like her old one did. Also, just how does the NCLC expect these seniors to tap into their home equity when the emergency arises?

13) Page 13 "Aggressive marketing by subprime lenders... Those marketing efforts have moved to the reverse mortgage market where many seniors may be drawn onto reverse mortgages that they do not need" What about the many that do need them that wouldn't have even known about them without "aggressive" marketing? What about the 96% satisfaction rates?

14) Page 15 While writing about "propietary reverse mortgages " While most of these products do not vary signifigantly from HECMs, borrowers have none of the basic consumer protection"

DO SOME RESEARCH, PLEASE! A) there is only one of these products out there B) the Loan To Value or LTV on it is MUCH lower than a HECM, it is very different, and the LTV's on these products was always much lower than for HECM's. Also, Counseling is required on all of these loans.

15) page 16 An exapmle is given of an borrower who took a "home income" product that A) has not been available for over ten years and B) has been illegal for almost that long. NOT ONE STORY OF A HAPPY REVERSE MORTGAGE BORROWER WAS INCLUDED 

16) page 18 "While the counseling attempts to empower seniors to avoid abuses, it is no match for the powerful market forces at playin the reverse mortgage industry"

What were those forces again? Oh I remember,  increased competition, profit and more clients, that's it. How are ANY of these bad?

I am literally nauseated when I read and type these excerpts out. I just cannot believe what a terrible job they did.

Here is the link if you want some toilet paper:

http://www.consumerlaw.org/reports/content/ReverseMortgages1009.pdf

Currently, there are 34 million Americans 65 or older. By 2030, this number should more than double to over 70 million, more than 20% of the U.S. populaton.

There are presently more than Twelve million people 65 or older who own their homes outright (no current mortgage.) This represents over $4 Trillion in untapped Home Equity.

Is there any doubt, in today's difficult economic times that the growth of Reverse Mortgages will continue?

The Office of the Comptroller of the Currency (OCC, a division of the US Treasury Dept.) recently came out with a consumer advisory report about Reverse Mortgages. If you remember, a few months ago, the head of the OCC, John Dugan, made one of the worst speeches ever and compared some Reverse Mortgages to subprime loans, so I was not expecting much from this report.

However, I was pleasantly suprised when I read it. The report is fair and except for two small complaints, it is accurate. Here is the link:

http://www.occ.gov/ftp/ADVISORY/2009-2.html

My only complaints are that 1) When it asks "Can I lose my Home?" it answers yes, before it explains the almost infinitesimally small chances of that happening (if taxes or insurance are not paid and there are no funds left in the loan to cover them, this does not happen often at all) AND 2) it says, and it is true that borrowers should not be persuaded as to how they should spend the proceeds, but why would they mention long term care insurance? How can someone buying LTC insurance be a bad thing?

HUD's absurd decision to cut every Home Equity Conversion Mortgage (HECM, the FHA Insured Reverse Mortgage Program) by 10% accross the board is one of the most insane decisions I have ever seen.

The background here is that the Congressional Budget Office decided a few months ago that, for the first time, the HECM program MAY produce a deficit in 2010 because of the drop in home values, and they asked congress to allocate an additional $800 million to the program. Keep in mind that this is complete conjecture because:

1) No one knows when any of these loans will terminate. (don't tell me about actuarial tables because most HECM's terminate by sale of the property and not death)

2) No one knows what the property values (or the overall Real Estate Market) will be when they terminate.

SO, to make every guessing moron happy, HUD decised to just reduce the loan amounts that people can get by 10% accross the board.  This will cause millions of people not to qualify for enough to pay off their existing loans. Keep going and you can see how this will cause more foreclosures, more property value deterioration, etc. The vicious cycle continues.

Also, they gave the industry an entire WEEK to get our loans in process through the FHA system and keep the old loan amounts. Wasn't that generous of them? How about a month or two next time?

To say that I am pissed off is an understatement. This was shameful.

I will start posting regularly again next week For now, there is just too much for me to do to. Limits (loan amounts) got reduced by ten percent. Reverse Mortgages for Co-ops look like a reality starting January, and many other interesting things are going on, both good and bad. I'll post about  them all as soon as I can. 

Here is the link to the video

http://www.cnn.com/video/#/video/business/2009/08/29/nr.reverse.mortgages.cnn?iref=videosearch

The "Housing Expert" knows less about Reverse Mortgages than my five year old son. I cringed as almsot everything he said was incorrect. I'm used to negative pieces where the "expert" is wrong, but the tone of this one is pretty positive, just completely inaccurate.I'm used to negative pieces where the "expert" is wrong, but the tone of this one is pretty positive, just completely inaccurate.

Here's a few of the beauties that Clyde Anderson says:

1) A Reverse is not like a line of credit? Most Reverses have a line of credit
2) Have to own the home free and clear or owe very little? I have paid off $400,000 loans with a Reverse Mortgage
3) If the home is worth $200,000, you can pretty much get $200,000. No way Jose.
4) You {only} get paid monthly?
5) Pay it off only when you sell the property, What happens if the borrowers die?
6) Interest Free? I don't think so.
7) One of the cons is knowing that you can qualify for one?

This guy, like so many others who have gone on TV, Radio or written in a newspaper; just doesn't have the basic understanding of how a Reverse Mortgage works. He should have done a lot more research.

John Yedinak's Reverse Mortgage Daily Blog posted the National Reverse Mortgage Lender Association's (NRMLA) response to the deplorable article that Consumer Reports had in it this month about Reverse Mortgages. (I had posted the link to the article last week)

The response is long and detailed and deals with every inaccuracy and ommision. It is excellent and I hope someone at Consumer Reports has teh brains and guts to print a retraction or at least a response.

Here is the link:

http://reversemortgagedaily.com/2009/09/03/nrmla-questions-validity-of-consumer-reports-reverse-mortgage-investigation/

AP ran a story today that says that many more older Americans will be working for many more years than they planned to and will make up almost all of the growth in th U.S. job market as younger people elect to stay in school.

I am hearing, almost every day, from Seniors that they just can't make ends meet. I'm hearing this from many who are still working.

Reverse Mortgages are helping many of these people and will continue to help them, unless the government screws things up. Let's hope for the best.

Here's the link to the story:

http://m.apnews.com/ap/db_8559/contentdetail.htm?contentguid=CeeL8XGo

Interthinx is one of the leading loss mitigation companies in the mortgage industry. What they do is check for and keep statistics on various types of mortgage fraud such as occupancy fraud, income fraud and valuation fraud.

They just came out with a report that shows that overall fraud is up this year over last and that, as they see it, this is a leading indicator of home prices remaining low at least until 2012.

The report is pretty thorough and except for their comment about rate resets (all rates that reset now are lowering borrowers rates because LIBOR and the CMT indexes are so low) they make a good case for more problems ahead in the housing market.

Here is the link to the report:

http://www.interthinx.com/pdf/09_Q2MFRI_FNL.pdf?utm_campaign=Just%20Released%20Mortgage%20Fraud%20Risk%20Report&utm_content=mpinter@greatrate.com&utm_medium=Email&utm_source=VerticalResponse&utm_term=here

For all those raving fans who were impressed that the Case Shiller Price index decreased by 15% instead of the 16% that was expected; Keep in mind: It's still going down!

I have been saying that it will take until 2011 for the market to start to rebound. Apparently some other peopel feel it will take even longer.

A recent report by PMI says that they predict that 60% of the top Metropolitan Statistical Areas have a greater than 50% chance of lower home proces in the first quarter of 2011. I have no idea how they came up with those numbers, but here's a quote from the report:

"Rapidly rising foreclosure and unemployment rates, continuing declines in house prices and weakening consumer demand all worked to increase risk in the general economy and the housing market."  

I hope 2011 will be when things get better, but 2012 is looking like a possibilty.