Tag Archives: United States Department of Housing and Urban Development

June 2013 Scorecard on Administration’s Comprehensive Housing Initiative

17 Jul

An interesting report on the state of the housing market today.  An excerpt:

“”The President’s housing market recovery efforts began immediately
after taking office in February 2009. The June 2013 housing
scorecard includes key indicators of market health and results of the
Administration’s comprehensive response, as outlined above:
• The Administration’s foreclosure mitigation programs
are providing relief for millions of homeowners as we
continue to recover from an unprecedented housing
crisis. More than 1.6 million homeowner assistance actions
have taken place through the Making Home Affordable Program,
including more than 1.2 million permanent modifications through
the Home Affordable Modification Program (HAMP), while the
Federal Housing Administration (FHA) has offered more than
1.8 million loss mitigation and early delinquency interventions.
The Administration’s programs continue to encourage improved
standards and processes in the industry, with HOPE Now lenders
offering families and individuals more than 3.6 million proprietary
mortgage modifications through April.
• Homeowners in HAMP continue to benefit from
significant payment relief increasing the long-term
likelihood of avoiding foreclosure. As of May, more
than 1.2 million homeowners have received a permanent
modification through HAMP, saving approximately $547
on their mortgage payments each month – a 39 percent
savings from their previous payment. In May, 69 percent of
homeowners with eligible non-GSE mortgages benefited from
principal reduction with their HAMP modification. Homeowners
currently in permanent HAMP modifications have been granted
an estimated $10.6 billion in total principal reduction.
View the Making Home Affordable Program Report with data
through May 2013.
Given the current fragility and recognizing that recovery will take
place over time, the Administration remains committed to its efforts
to prevent avoidable foreclosures and stabilize the housing market.””

Read the full report here:

Click to access huddoc

Reverse Mortgage Financial Assessment Guidance Proposed

15 May

In the wake of regulatory issues involving the HECM reverse mortgage (Home Equity Conversion Mortgage) the National Reverse Mortgage Lenders Association proposed guidance for the Department of Housing and Urban Development toward a financial assessment of reverse mortgage borrowers.

In order to determine whether borrowers are at risk for falling into default on reverse mortgage loans prior to their taking one out, NRMLA’s policy committee studied borrower data past and present including credit profiles and tax and insurance histories.

“The program is going to require a bit of retooling in response to the lessons that have been learned, to make the product more specific to consumers’ needs as well as their capacity to have a successful experience,” said Peter Bell, NRMLA president and CEO before attendees of NRMLA’s west coast regional conference in Irvine, California this week.

In developing the recommendations, NRMLA considered the goal of making the product more sustainable and better equipped to serve its intended purpose for borrowers to fund longevity rather than the most recent primary use of drawing all proceeds at once.

“Our recommendations on the financial assessment and how that should look is principally in order to reduce the tax and insurance delinquency rate,” said Colin Cushman, President and CEO of Generation Mortgage. “We hope FHA takes it on as at least something to think through.”

The NRMLA committee found the complexity of certain financial scenarios surrounding borrower defaults required a comprehensive solution involving financial assessment as well as principal limit utilization to test whether the applicant will be able to meet their obligations over the life of the loan.

Capacity and willingness to pay ongoing property charges are considered in the proposal, which involves a test for each. The capacity test looks at income and capacity to pay property taxes and insurance charges while the willingness test looks at whether historically borrowers have demonstrated they are willing to keep those payments current.

Additional requirements would apply to higher risk applicants who do not pass both tests, in order to offset that risk. Those might include reduction of principal limit factors, raising the mortgage insurance premium or requiring a tax and insurance escrow.

New York Regional NRMLA Conference Offers Useful Information – Part THREE – The Technical Default Process

25 Mar

Day Two of the NRMLA conference provided a useful session by Lorraine Geraci on the art of communication with seniors, with a discussion on the physical aspects of aging and a caution to avoid stereotyping older people.

The second workshop of the day gave a detailed look at technical default presented by representatives of HUD, RMS reverse mortgage servicers, and CredAbility reverse mortgage counseling agency.

Taxes and insurance payments made by reverse mortgage borrowers are tracked by the servicer through a third party.  If they are in arrears, the borrower is contacted within 30 days to discuss cure options:  the overdrawn amount can be paid back on a payment plan, the entire loan can be repaid, or the borrower can execute a deed-in-lieu of foreclosure.

HUD has a program to provide default counseling.  Upon review of the borrower’s budget, a deficit is usually found which the counselor attempts to help rectify.  Borrowers are referred to agencies which provide benefits and are encouraged to apply for available help such as SNAP (food stamps), free cell phones, and home sharing options.  The borrower can usually find $200 in savings in this way.

Many seniors pride themselves in their self sufficiency and are reluctant to participate in public assistance until long after the point at which they qualified.  It often takes three or more sessions with a counselor to achieve maximum improvement.  If money cannot be found through savings in the budget, counselors then discuss asking children or grandchildren for help in meeting budget deficits or in moving to alternative housing.

Loan originators are encouraged to provide information at the time of the initial application about tax reductions, etc, that may be available to the senior borrower.

Of the approximately 1400 default counseling sessions done last year, half were able to successfully get into a repayment plan.

Case Study:

A pilot program in the Philadelphia area has been instituted to help guard against the danger of HECM foreclosure. They began with date they had:  borrowers whose loans were already “due and payable”.  Contact was attempted, first with a telephone call, then a letter, and finally a visit to the property.  A counselor assists with enrollment in benefits programs and all efforts are made to keep the borrower in their home.

The help of HECM servicers was enlisted to obtain data on defaulted borrowers not yet due and payable.  These seniors are enrolled in benefit programs, new less-expensive homeowners’ insurance is put in place, live-in family members are asked to commit money to pay a part of expenses, TV services are bundled into more economical packages.  Perhaps most importantly, the repayment plans can be extended from one to two years, offering flexibility to meet goals more successfully.

Mark Helm from RMS servicing said that 6.7% of their HECM portfolio is currently in tax and insurance default.  75% of these borrowers began with a “constructive default”: they had been in arrears on their taxes and had let insurance lapse before the beginning of the loan.  The majority are insurance defaults.  34% of borrowers in default are on a payment plan now, and if they fail to keep up repayments for 120 days, they are given a second chance.  Of the borrowers on a payment plan, 77% succeed in bringing their account up-to-date.

Of all the defaulted borrowers that are contacted, a number are non-responsive to letters and calls, but an inspection visit can often lead a borrower to begin repayment.  Sometimes an inspection may find the property vacant, in which case a short sale is attempted before foreclosure.  Multiple extensions may be granted.  The usual time frame from “due and payable” to foreclosure is 6 months, with 90-day extensions granted.

The recent rise in home values may offer a chance for borrowers to do a HECM-to-HECM refinance to boost loan proceeds.  Although national home values are reported to be up 10%, HECM REO values are only up 3% due to maintenance issues, making this potential option less viable for some.



New York Regional NRMLA Conference Offers Useful Information – Part TWO – Industry/HUD/FHA Updates

21 Mar

NRMLA President Peter Bell offered welcoming remarks at the General Session Tuesday March 19, 2013.   Guest speakers remarked that 8000 Americans turn 65 every day, and eleven million retirees will not be able to afford household expenses.  Again it was stressed how important a reverse mortgage can be in a wealth management portfolio.  Americans have 50 – 66% of their assets tied up in home equity, while only 2% of those eligible have taken advantage of the HECM product.

Director of HUD Single Family Program Development Karen Hill spoke about FHA policy.  She mentioned the predicted effects of the current sequestration: Staff impacts will include furloughs, a hiring freeze, and limited travel and training.  There will likely be delays in mortgage insurance applications, claims and answers to inquiries.  Counseling grants could also be impacted.

The mission of the FHA is to provide access to credit for under-served borrowers.  They must preserve the health of the MMI fund and manage/mitigate loss.  Steps taken this year were to raise the MMP in forward loans and to consolidate the fixed HECM products, eliminating the Fixed Standard on April 1 of this year.  Ms. Hill predicted that slightly fewer HECMs would be endorsed this year.

Currently, she reported, 73% of HECMs are fixed rate while only 23% are adjustable rate products.  Issues that will be addressed this year are the cap on HECM endorsements, the non-borrowing spouse scenario, and the funding and availability of HECM counseling.  Policy changes being considered may set limits on loan draws, mandate escrows for taxes and insurance, and implement a financial assessment for borrowers.  Policy will be published August 1st for implementation in October.

John Olmstead from the HUD Office of Housing Counseling remarked on their intentions to improve monitoring, communications and metrics for reporting the data collected by reverse mortgage counselors.  There are currently 2400 approved counseling agencies, 129 of which are approved for HECM counseling.  There are 629 active, approved HECM counselors today.

Recent guidance which has been promulgated to reverse mortgage providers includes warning against steering, loan officer participation in counseling, and cases where a loan officer has provided answers to possible counseling quiz answers.

HUD staff reported that $895 million has been disbursed from the insurance fund for 8591 claims processed.  61% of claims resulted from foreclosure and deed-in-lieu, 23 from assignments of mortgage, and a further 9% from mortgagors’ sale.

The Conference then moved to a panel discussion on the state of the reverse mortgage industry.  The goal of empowering the FHA with authority over the HECM product was discussed.  Broadening the marketplace, however, was the theme that everyone agreed is top priority.  Communication with the general public is key.  There have been fewer HECM loans written in the recent past, but the product remains a valuable one.  It is possible that sales strategies changed when the fixed rate product came to the market in 2009 and they need to be changed again to illustrate to seniors the advantages of a reverse mortgage.

The mission of the HECM program is to facilitate aging in place, and many factors in the current market favor its success.  Aging Baby Boomers, appreciation of home values, and the money being spent on TV advertising all bode well for the future of the HECM program.

In NRMLA’s future, we see more professional education and more involvement of state legislators/regulators.

Federal Legislation Affects Reverse Mortgages

7 Mar

Two issues exist that affect reverse mortgages:


The first is the current budget sequester.  With federal funding cut to HUD grants that provide reverse mortgage counseling,

“From HUD’s perspective, the March 1 sequestration would also have even broader harmful effects on middle class families, on communities, and on the economy across the nation. Specifically: Sequestration would result in 75,000 fewer households receiving foreclosure prevention, pre-purchase, rental or other counseling though HUD housing counseling grants,”  said  Department of Housing and Urban Development Secretary Shaun Donovan.


The second is the current cap set by Congress on the total number of HECM reverse mortgages that can be insured by the FHA.  The cap has been raised from 2,500 loans in 1990 to 25,000 loans by the end of 1995., with subsequent raises of the cap leading to its current level, set in 2006 at 275,000.

“A major issue faced by the reverse mortgage industry is that, while the HECM program was made permanent back in 1998, there has been a statutory limit on the number of loans FHA is authorized to insure,” NRMLA President Peter Bell said in testimony presented to the Senate Banking Committee. “Although the cap has been routinely raised or suspended by Congress in a series of consecutive appropriations measures and continuing resolutions, the existence of the cap deters some industry participants from making the commitment required to fully embrace reverse mortgage lending, thus keeping competition in the market at a minimal level.”

“NRMLA urges Congress to support the continued availability of Home Equity Conversion Mortgages by permanently removing the cap on the number of HECMs that FHA may insure to minimize any possible disruption in the availability of this importance personal financial management tool,” Bell said.

HUD Housing Scorecard for April

18 May

The April HUD Housing Scorecard can be seen in its entirety at www.hud.cov/scorecard

Each month, the U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of the Treasury produce a monthly scorecard on the health of the nation’s housing market. The scorecard incorporates key housing market indicators and highlights the impact of the housing recovery efforts, including assistance to homeowners through the Federal Housing Administration (FHA) and the Home Affordable Modification Program (HAMP).

The Obama Administration’s goal is to stabilize the housing market and provide security for homeowners.

The President’s housing market recovery efforts began immediately after taking office in February 2009. The April 2012 housing scorecard includes the following key indicators of market health and results of the Administration’s comprehensive response:

Market data show progress on home sales and mortgage delinquencies, but continued fragility overall.

  • Mortgage delinquencies have declined for four consecutive months and remain substantially below year ago levels
  • Sales of existing homes in the first quarter were 5.3 percent higher than one year ago.
  • While data on home prices were soft in many mortgage markets, adjusting for the traditionally slow winter months reveals the first uptick since April 2011.
  • Inventories of homes for sale are at their lowest levels in years; at the current sales pace, it would take 5.3 months to sell the current months’ supply of new homes for sale and 6.3 months to sell the current supply of existing homes. Experts consider a six month supply of homes for sale to be a balanced market.

Recovery efforts continue to help millions of families deal with the worst economic crisis since the Great Depression.

  • More than 5.9 million modification arrangements were started between April 2009 and the end of March 2012 – including more than 1.8 million HAMP trial modification starts and more than 1.3 million FHA loss mitigation and early delinquency interventions.
  • Programs continue to encourage improved standards and processes in the industry, with HOPE Now lenders offering families and individuals more than 2.8 million proprietary mortgage modifications through February.

Eligible homeowners entering HAMP continue to demonstrate a high likelihood of long-term success in the program.

  • As of March, more than 990,000 homeowners received a permanent HAMP modification, saving approximately $535 on their mortgage payments each month with a total estimated savings of $12.2 billion to date.
  • Eighty-six percent of homeowners entering the program in the last 21 months have received a permanent modification, with an average trial period of 3.5 months.
  • After six months in the program, more than 94 percent of homeowners remain in their HAMP permanent modification.



The Reverse Mortgage Nest Egg

24 Jan

According to CBS News MoneyWatch, Americans aged 62 and older had accumulated $3.19 trillion in home equity by the end of the third quarter of 2011, according to data recently released by the National Reverse Mortgage Lenders Association (NRMLA). During the same quarter, home equity increased by $46 billion, reflecting stabilization and improvement in home prices. The $3.19 trillion is the net result of a $4.2 trillion increase in aggregate senior housing values and a mortgage debt of $1.02 trillion.

Reverse mortgages are one way to use your home equity in retirement. You can borrow against the equity in your home without having to make monthly payments as required when you have a traditional mortgage or home equity loan. Under a reverse mortgage, funds are advanced to you, and interest accrues on this balance. The outstanding balance isn’t repaid until you leave the home, sell it or pass away. You can take loan proceeds as a lump sum at loan origination, establish a line of credit or request fixed monthly payments for as long as you continue to live in your home.

According to the NRMLA, 99 percent of the reverse mortgages offered in America are home equity conversion mortgages (HECM) that are insured by the U.S. Department of Housing and Urban Development (HUD). To date, more than 725,000 senior households have utilized an HECM.  

Possible uses of a reverse mortgage include: 

— To pay for high medical or long-term care bills
— To pay for needed repairs on your home
— To provide a monthly payment to supplement your retirement income
— To buy a new home

Here’s one example of how a reverse mortgage might work, according to an online calculator offered by the NRMLA. A 70-year-old couple with a paid-for home worth $300,000 could get a monthly payment of $986 for as long as they live in the home or a single sum payment of $172,564.  The monthly income shown by this example would certainly help supplement Social Security and other retirement income.



5 Jan

We wonder how many of our Reverse Mortgage partners are transplants from the forward/traditional mortgage world?  Do you say ten-oh-three when you really mean ten-oh-nine?  Or were you born into the mortgage industry as a reverse originator?

Yesterday, RMD asked “Is Forward Experience Becoming More Valuable to Reverse Mortgage Lenders?”

Reverse mortgages have traditionally required different skills to originate, but changes made to the program are making them increasingly similar to forward mortgage products.

One change comes in the form of the use of a financial assessment by MetLife that works to prevent tax and insurance defaults by examining a borrower’s credit history and income.

With other lenders and the Department of Housing and Urban Development expected to release their own guidelines, originators will need more experience in compiling documents and verifying income and credit history. The loan process is beginning to mirror that of a conventional 30-year fixed refinance.

“Underwriting certainly becomes more like forward because of financial capacity underwriting,” says John Lunde, president and co-founder of Reverse Market Insight, referring to the recent implementation of a borrower financial assessment by MetLife. “But the biggest difference is the client and all the differences that brings up.”.

The origination of reverse mortgages has also shifted with the decline of retail giants, Helm says.

“It used to be the majority of the [reverse] loans were generated through retail establishments, and that’s changed,” he says. “Now it’s more knocking on doors, just like the forward business has been all along.”

But the similarities and experience may be more important to some parts of the process than others, and what differentiates the forward business from the reverse business at the end of the day will always be the borrower, Lunde says.

“There are a lot more differences than similarities because of whom we’re dealing with,” he says.

HECM For Co-ops Urged By Members Of Congress

30 Aug

A letter signed by eight members of Congress that urges the Department of Housing and Urban Development to allow co-ops under the HECM program has circulated among policymakers. Addressed to Housing Secretary Shawn Donovan, the letter stresses the high number of co-ops in the United States and the disadvantage seniors face by living in them and not being able to qualify for a HECM loan.

There are over a million cooperative units in the United States, a substantial number of which are in New York City.  One of the signers of the letter, Rep. Carolyn Maloney (D-NY) emphasized the powerful potential reverse mortgages have to free up equity for New York City seniors.  “Often these seniors’ homes are their  largest asset. By freeing up the equity in those homes, seniors can remain in their homes and live comfortably.”
The latest from HUD on the HECM program and co-ops was a statement from a HUD spokesman in late 2010 which noted the department was evaluating the HECM program for co-ops to determine if it would meet HUD’s financial requirements.

RESPA Compliance Guidance as it Applies to the Federal Reserve Board’s Mortgage Loan Originator Compensation Rules

23 Mar

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 The U.S. Department of Housing and Urban Development’s Office of Housing, Office of RESPA and ILS  issues the following additional guidance on how mortgage loan originators (MLO) comply with the Real Estate Settlement Procedures Act (RESPA), in light of the Federal Reserve Board’s (FRB) Loan Originator Compensation rule that is effective April 1, 2011.


   This guidance seeks to clarify RESPA requirements related to proper disclosure on the GFE and HUD-1 settlement statement.


This guidance does not address substantive issues related to restrictions on mortgage loan originator compensation that are within the jurisdiction of the FRB.  The link to the RESPA guidance PDF is here:


There is still some confusion as to LO compensation – more information to follow.