Michael Pinter's Reverse Mortgage Blog

I am nauseous over the NCLC "report" on Reverse Mortgages

First Meridian Mortgage/Trump Financial — Wed, 28 Oct 2009 10:45:27 -0500

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

A Few Interesting Demographic Statistics About Reverse Mortgages

First Meridian Mortgage/Trump Financial — Mon, 19 Oct 2009 14:23:41 -0500

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?

OCC has a pretty decent Advisory about Reverse Motgages

First Meridian Mortgage/Trump Financial — Fri, 16 Oct 2009 08:18:40 -0500

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?

Reverse Mortgages just got screwed

First Meridian Mortgage/Trump Financial — Fri, 02 Oct 2009 12:34:44 -0500

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.

sorry I haven't posted in a while, A lot has been going on in the Reverse Mortgage World

First Meridian Mortgage/Trump Financial — Thu, 01 Oct 2009 15:58:13 -0500

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.

The Most Incorrect Reverse Mortgage Television piece I have ever seen

First Meridian Mortgage/Trump Financial — Tue, 08 Sep 2009 15:21:34 -0500

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.

NRMLA Responds to the Horrible Reverse Mortgage Article by Consumer Reports

First Meridian Mortgage/Trump Financial — Fri, 04 Sep 2009 07:50:28 -0500

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/

Another Story About Financial Troubles for Older Americans

First Meridian Mortgage/Trump Financial — Thu, 03 Sep 2009 07:48:54 -0500

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

A New Report Predicts more Problems in the Housing Market Through 2012

First Meridian Mortgage/Trump Financial — Thu, 27 Aug 2009 12:23:39 -0500

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

The Housing Market has not hit bottom yet

First Meridian Mortgage/Trump Financial — Tue, 25 Aug 2009 10:16:22 -0500

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.

The Need for Reverse Mortgages is growing

First Meridian Mortgage/Trump Financial — Mon, 24 Aug 2009 08:19:29 -0500

Here is an AP story from today that shows that, because there was no inflatiion this year, there will be no Cost Of Living Adjustement (COLA) to Social Security payments this year or next. Here is the lnk:

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

So, once again Seniors will see a lot of their expenses (heat, food, medication, etc.) go up and have no increase in their fixed income.

Clearly, the need for Reverse Mortgages will only grow in this environment. Hopefully, Congress won't screw up the product and will allow it to continue to help so many people.

A Good Reverse Mortgage Article and Bad one

First Meridian Mortgage/Trump Financial — Thu, 20 Aug 2009 08:09:00 -0500

First the good news: In "The Sokesman," Tom kelly writes avery good (and short) article about how Reverse Mortgages should not be labeled as "bad" or similar to "subprime." He really hits the nail on the head. Here is the link:

http://www.spokesman.com/stories/2009/aug/16/reverse-mortgages-shouldnt-be-lumped-into-bad/

In contrast; Consumer Reports has an article this month about Reverse Mortgages that is horrible. I can't even imagine a worse piece if I tried. Every negative is emphasized, including Senatir Mckaskill's ridiculous hearings and HUD's request for more money to subsidize the potential for losses (of course the author does mention that the losses may never happen.)

This is another example of the fearmongering and one-sided reporting that had been the norm for many yaers and that, to this day, has probably misled millions of people into thinking that Reverse Mortgages are some kind of trap to take away senior citizens homes.

I am thoroughly disgusted by the article and if you want to be disgusted too, here is the link to it:

http://www.consumerreports.org/cro/magazine-archive/september-2009/personal-finance/reverse-mortgages/overview/reverse-mortgages-ov.htm

Fox Business Reverse Mortgage Video

First Meridian Mortgage/Trump Financial — Wed, 19 Aug 2009 13:44:31 -0500

Fox Business News had a short piece on Reverse Mortgages last week. The two anchors are pretty ignorant about the product and the guest, Jim Randel was okay, but not great. He defends againast the notion of "just sell the house", but then he said that a HELOC is a better choice if you can qualify for it.

The truth is that they are far from interchangable. For starters, A HELOC requires monthly payments and is finite. A HELOC will provide monthly revenue for as long as a borrower still lives in the home.

Here is the link: http://www.foxbusiness.com/search-results/m/25692489/is-a-reverse-mortgage-right-for-you.htm#q=Randel

Very Informative Reverse Mortgage Presentation from HUD

First Meridian Mortgage/Trump Financial — Wed, 19 Aug 2009 08:51:42 -0500

I never thought I would be fascinated by a Presentation from the Governmnet, but the Reverse Mortgage Piece from HUD, published last Demeber really had me enthralled. I found it through Reverse Mortgage Insight and here is the link:

http://rminsight.net/blog/wp-content/uploads/2009/08/hud-szymanoski-cushman-hecm-finance11-30-08.ppt

It's 44 pages long and a little technical at times, but in it you will learn:

HUD's role in The Home Equity Conversion Mortgage (HECM -This is the FHA Reverse Mortgage Process - Page 3

How the Government may take losses and that as of December of last year- the governmnet has not only taken no losses on the HECM program, but is actually taking more premiums than forecasted losses. Pgs 4-6 14-15

How Reverse Mortgage loan amounts are determined. Pgs 8-11

Why long term losses are more tied to the Real Estate market than anything else. Pgs 16-17

What happens to Reverse Mortgages in the Secondary Market. Pgs 16-43

What an Interest rate swap is. Page 27

I really learned a lot and anyoen with a basic understanding of how Reverse Mortgages work should also find it educational

A Few Statistics about The Reverse Mortgage mArket

First Meridian Mortgage/Trump Financial — Tue, 18 Aug 2009 08:47:04 -0500

The Baby Boomers started turning 62 last year (2008) and over 15 million people will turn 62 every year for the next seventeen years.

Over 84 percent of senior respondents said that they wantto stay in their home for the rest of their lives.

The U.S. Department of Census estimates that by 2020, nearly 14 million Americans will be over 85.

The fastest growing segment of the population NOW is over 65.

Approximately 2 million elderly people pay privately for home health care.

There is just no doubt that the need for Reverse Mortgages will continue to grow for the foreseeable future.

Great Reverse Mortgage article in The Connecticut Post

First Meridian Mortgage/Trump Financial — Mon, 17 Aug 2009 09:47:35 -0500

Another great article (there have been many lately) last week in The Connecticut Post. Here is the link:

http://www.connpost.com/ci_13023237

In it, an good example of someone who could not make ends meet used a Reverse to improve their lives. It also mentions that Reverse Mortgages are only a last resort. Excellent piece.

Fantastic Reverse Mortgage Artcle in Newsday

First Meridian Mortgage/Trump Financial — Thu, 13 Aug 2009 08:53:46 -0500

Saul Friedman wrote a great article about Reverse Mortgages in Newsday a few days ago. Here is the link:

http://www.newsday.com/columnists/saul-friedman/gray-matters-reverse-mortgages-are-still-safe-1.1347485

In it, he challenge Senator Claire McKaskill about her recent hearings and negative statements about Reverse Mortgages. I think it is great. While everyone in teh business knows that there are a few bad apples, the vast majority of people working with Reverse Mortgages are honest. While there are a few unhappy borrowers, even though Senator McKaskill only found one upset daughter of a borrower to testify (and she really did not know what she was talking about) well over 90 percent of Reverse Mortgage borrowers are happy. It is important to put this into the context of other financial products that have MUCH lower satisfaction rates.

For a Senator, or any public official to talk about the "possible abuses" and problems and never mention the many positives and unique benefits, is unprofessional and wrong.

Wow, Foreclosures are on the rise! Did anyone not see this coming?

First Meridian Mortgage/Trump Financial — Thu, 13 Aug 2009 07:58:37 -0500

AP ran a story this morning from RealtyTrac that foreclosures were higher in July than any month since foreclosures have been statistically recorded. Here is the link:

http://m.apnews.com/ap/db_8559/contentdetail.htm?contentguid=ADn6wDlV

Does this suprise anyone? The economy is still in the toilet, despite what so many moronic economists are saying. The housing market is still deteriorating nationally despite what a few absurd indicators show(new Home sales are up! Wow, but new homes are only a ridiculously small percentage of the overall market!)

I have been posting for over a year that the foreclosure "crisis" is only beginning. This is due, in large part, simply to the length of time that it takes for a home to go through the foreclosure process in many states. This can take well over a year and as long as three years, just in New York.

Considering the rising unemployment, general malaise of the economy and continuing reduction of home values; more and more homes will enter the foreclosure process over the coming months and it will take at least until 2011 for the housing market to start to rise on a national level.

The issue is that the many foreclosed homes will have to be sold at a discount to the current market to get them short-sold (if the borrower is still there) or sold out of the bank-owned Real Estate portfolio. This will take a long time and will continue to pressure the housing market for a very long time, regardless of when exactly the economy as a whole, starts to grow again.

Very Good Reverse Mortgage article in Yahoo Finance & Kiplingers

First Meridian Mortgage/Trump Financial — Wed, 12 Aug 2009 08:16:39 -0500

Yahoo Finance posted a very positive Reverse Mortgage piece that was originally in Kiplingers. There are a few issues, like where it says that Reverse Mortgages are only if you paid off your loan or have a small balance (I just paid off a $400,000 loan with a Reverse) but overall it is a positive piece.

Here is the link:

http://finance.yahoo.com/focus-retirement/article/107465/reverse-mortgages-to-the-rescue.html?mod=fidelity-livingretirement

Interesting Editorial in today's Wall Street Journal

First Meridian Mortgage/Trump Financial — Tue, 11 Aug 2009 09:23:35 -0500

Today's Wall Street Journal has an editorial today that warns that the Federal Housing Authority (FHA) and the agency that buys their loans, Ginnie Mae (almost all Reverse Mortgages are FHA insured) is getting too risky and could eventually need taxpayer bailout like Fannie Mae and Freddie Mac.

Here is the link to the article:

http://online.wsj.com/article/SB10001424052970204908604574334662183078806.html

I agree that there may be a shortfall in the future and I have posted before that it is possible, but comparing FHA loans to subprime is not really accurate for the following reasons:

1) All FHA loans require income verification. Almost all subprime defaults were no income or no doc

2) FHA loans are only for primary residences. One loan per customer. A lot of subprime defaults were on investment properties and many had multiple loans per client.

3) FHA fraud is prosecuted federally and once you defraud or even default on a federal loan, you get put on a list and cannot borrow or even be involved in the loan process again. There were no safeguards like this for subprime loans.

4)The government does take insurance premiums at the closing and on an ongoing basis for FHA loans. Obviously the question is do they have enough in premiums to cover the claim, but only time will tell the answer to that.

Has the Economy "Turned a Corner?"

First Meridian Mortgage/Trump Financial — Mon, 03 Aug 2009 12:43:20 -0500

Here's a link to an AP story that ran over the weekend:

http://m.apnews.com/ap/db_8559/contentdetail.htm?contentguid=FDzGH9Rw

In it, a bunch of people from the government say that we are on "the verge" of coming out of the recession. I can't belive the absurdity of these statements.

The fact that we only losing 550,000 jobs a month instead of 600,000 does not mean that we are on teh right track.

The fact that home prices continue to deteriorate, just not as fast as they were dropping before, does not mean that the Real Estate market has hit bottom. If it starts to rise, it might mean that.

I predicted well over a year ago (check my earlier posts) that the housing market won't hit bottom until 2011. I hope I'm wrong, but I don't think I am. There are still millions of homes in foreclosure that need to go through the system before we come out of this mess.

Before I start to get comments saying that I should be positive and not a "naysayer" I want to say that in this market and this economy, there are millions of people who are thriving. Regardless of the market as a whole or the economy as a whole, there are tremendous opportunities now and always. That is the beauty of our country and capitalism.

The House Voted to Reduce Reverse Mortgage Benefits

First Meridian Mortgage/Trump Financial — Wed, 29 Jul 2009 09:51:56 -0500

A little background is needed to explain what happened.

About a month ago, HUD asked Congress for about $800 million dollars extra to fund possible future shortfalls in the FHA Home Equity Conversion Mortgage (HECM) program. This is the FHA Reverse Mortgage program and the request was based completely on conjecture about how many claims there could be in the future and how much they will cost.

A claim occurs on a Reverse Mortgage when the borrowers pass away or sell the property and the property is worth less than what is owed. Since these loans are insured by FHA, the lender then makes a claim and the government has to make them whole. FHA collects and has collected Billions of dollars in premiums to cover any possible claims and there have been statistically, almost none to date.

Apparently, someone decided that the claims might exceed the collected premiums because of the recent drop in Real Estate values. The problem is that no one knows when these borrowers will die or where the Real Estate market will be when they do.

Yesterday, the House voted to reduce HECM benefits so that there would be no shortfall. Nobody knows how much of a reduction that will mean or what kind of change in the product that will cause. Let's hope the Senate is a little more prudent.

First Reverse is Shutting Down

First Meridian Mortgage/Trump Financial — Tue, 28 Jul 2009 08:19:20 -0500

First Reverse, the Reverse Mortgage company that was acquired by Wilmington Savings Fund Society (WSFS) a Delaware Bank in 2008 is being "wound down" because they were still losing money (although much less than last year) and the bank had a bad quarter.

This stinks because (as I had posted earlier) First Reverse was one of only two lenders that were offering the Jumbo Reverse Mortgage loans for properties that were worth over $2 million dollars.

I wonder if some other entity will pick them up.

A lot of Reverse Mortgage Legislation is being discussed in Congress

First Meridian Mortgage/Trump Financial — Fri, 24 Jul 2009 14:37:50 -0500

Congress is discussing extending the $625,500 limit out at least another year (Thank God) but in the same breath lowering how much borrowers can get. This is coming primarily because HUD recently asked Congress for an additional $800 Million because of possible future losses from possible increases in claims.

There was also discussion about increasing the Home Equity Conversion Mortgage (HECM) limit to $729,000. This would be fantastic, but if loan amounts get lowered, it would be tough to determine if we would be better off or not.

I can say without a doubt that almost every piece of recent legislation concerning the mortgage insustry has not come close to accomplishing it's objectives (e.g. Hope for Homeowners, HVCC, etc.) and that it seems clear to me that Congress as a whole does not have a clue as to what is in the best interests of the homeowner or taxpayer.

Who knows where we will end up in October (FHA Fiscal year starts in October) but I hope the legislators are geting the correct information.

Reverse Mortgages are not always the right solution

First Meridian Mortgage/Trump Financial — Wed, 22 Jul 2009 07:05:38 -0500

I know I've posted a lot about how great Reverse Mortgages are, but the truth is that every situation is different. I have a Reverse Mortgage ready to close and the borrower now wants to explore taking a regular "forward" mortgage. My first instinct was to convince them that a Reverse was better, but the truth is that in this case I just can't figure out what is better for him.

Here is the situation: The Borrower owes about $175,000 on a house worth about $900,000. They can qualify for about $400,000 from a Reverse. They only need about $50,000 right now for some expenses.

Assuming they can qualify for a $400,000 regular mortgage, the borrowers are telling me that they would prefer to take that because as they make payments their equity will grow, as opposed to a Reverse where their equity will decrease.

I analyzed both loans after ten years and this is what I came up with:

With the Reverse, if they only took the $50,000 (plus the $175K to pay off their loan and closing costs) out, after ten years, they would owe about $500,000. I assumed that rates would stay near their historical norms and averaged them about 3% higher than today's.

With the Forward, they would get about $210,000 today, but they would pay almost $270,000 over the ten years in monthly mortgage payments. After ten years they would still owe about $330,000.

I am not sure what is better for them.

Any thoughts would be appreciated