The World Emulates HECMs
“The World Emulates HECMs.” So reports HECM architect Ed Szymanoski in an interview in the January issue of Reverse Mortgage Magazine. “So many Asian countries have come to us to talk about the possibility of getting into this market, because they have rapidly aging populations. Populations are aging more rapidly in that part of the world than in the United States—and they recognize the strains that this is placing on their governments and the need to provide for a social safety net for their elderly citizens,” Szymanoski says.
“I think, however, that the HECM remains far and away the most successful program internationally. Certainly no other has achieved the same scale. We think of HECM as a small-scale program, because it only has 2 to 3 percent market penetration, but that is still a relatively large number compared to other nations. HECM is still the program most nations try to emulate. We have made great strides, whether it is managing crossover risk (loan balance vs. property value) or expanding liquidity needs for lenders with the Ginnie Mae HMBS program. “
“We often think of the government contribution to HECMs as being just FHA, but it’s also the liquidity and what Ginnie Mae brings to the market. It’s probably better suited that Ginnie Mae is tapping the liquidity of Wall Street investors. That is a great accomplishment. The HECM still needs to be refined as we go forward, but that is a great combination of government providing the backstop on the credit risk side as well as the funding vehicle on the liquidity side. No other nation has been able to replicate that.”
In the Press: New Year, New Vibrancy The New Year has seemed to usher in a vibrant new conversation about reverse mortgages in the national press. The confluence of program alterations (Financial Assessment, draw limitations, non-borrowing spouse leniency), as well as the steadily increasing need for retirement funding solutions, seem to have removed skepticism and encouraged reporters to suggest the HECM as something that needs your consideration. Recent examples:
- “Reverse Mortgage for Investment Protection,” written by Michael Lazar for Huffington Post, explains why the media has changed its tone on reverse mortgages by highlighting a recent column written by Robert Powell for USA Today.
“As for the reverse mortgage, some experts suggest applying for a reverse mortgage with a line of credit as soon as possible,” Powell wrote. “Why might you do this? Having a reverse mortgage with line of credit in place gives you the option of taking money out of your house instead of your IRAs when markets are down.”
- “Make Money Last: Consider a Reverse Mortgage,” published by Bankrate.com, features a conversation between financial journalists Jean Chatzky and Jane Bryant Quinn. Quinn, who is promoting a book called How to Make Your Money Last, talks about why younger retirees should consider establishing a reverse mortgage line of credit.
Quinn tells Chatzky: “So you’re 62 and you say I’m going to want to stay in my house for the next 20, 30 years. So you take the reverse mortgage against your house in the form of a credit line. And the magic of a credit line with a reverse mortgage is that it increases every year by the interest rate and the insurance fee. You’re not actually paying this interest. It builds up inside the loan. So that beautiful credit line sits there, not costing you anything else.”
“Ten to 15 years from now, you may have a huge credit line against your house that you can use to help pay your bills. It’s a brand-new use of the reverse mortgage.”
- “10 Things You Should Know About Reverse Mortgages,” written by award-winning, nationally syndicated columnist Ilyce Glink for CBS Marketwatch, includes a comprehensive analysis of HECM program features and requirements as explained by NRMLA President Peter Bell.
“By having the funds from a reverse mortgage line of credit available, seniors may not have to sell off stocks or other assets to cover unexpected costs,” Glink writes.
“We find retirees have peaks and troughs in their cash needs,” Bell says. “’With a reverse mortgage, they’re able to hold on to their other investments (when they need extra cash) and continue to collect dividends on those.”
On the Docket: New Due and Payable Timeline Extension Mortgagees were given an extension through April 17, 2016, to identify loans in their portfolios that must be called due and payable, or first legal action initiated, because they are in a technical default status and have no way of being cured.
The extension was announced this week in Mortgagee Letter 2016-1. It is the second extension granted by HUD since the publication of Mortgagee Letter 2015-11 last April.
America’s Seniors Holding $5.76 Trillion in Home Equity An estimated $147 billion increase in the aggregate value of homes owned by seniors drove their share of home equity to $5.76 trillion and rocketed the NRMLA/RiskSpan Reverse Mortgage Market Index (RMMI) to an all-time high of 200.19 in the third quarter of 2015.
Mortgage debt held by seniors increased slightly from $1.45 trillion to $1.46 trillion last quarter, but the uptick was barely a dent in home equity levels, which have climbed steadily for 18 consecutive quarters.
Impact of Longevity NRMLA member companies were well represented at December’s National Aging in Place Council’s Annual Meeting in Atlanta, where Kathryn Lawler of the Atlanta Regional Commission gave a detailed preview of the long-term effects of longevity on all of our lives.
“Nothing in the community, economy or the way we live is going to go unaffected by longevity,” said Lawler, who is respected as one of the leading thinkers on aging issues. Lawler showed how the median age in the Atlanta area has gone from the mid-20s in 1990 to over 50 in some of the communities. Among other things, this change in population share can mean the education system diminishes, property values change, new housing needs grow, traffic increases, the workforce changes, and chronic disease and caregiving alter budget demands. “We built communities where it is very difficult to age,” she said. “And we built them over and over. Now we have to change the way we spend money. The one thing we shouldn’t do is what we did before.”
Going forward, among the strategies Lawler suggests are: a massive rethinking of how we finance housing (“When people live into their 80s and 90s, is it a good idea that shelter and savings are so linked?”); a “capture and reinvest” approach where money saved from some solutions is repositioned to finance research on other solutions; and framing requests (for appropriation) not with our own emotions or biases, but in ways that appeal to those (governments) we are asking to make changes.
Members: Influential Counseling Pioneer Retires Sue Brown, vice president of Reverse Mortgage Counseling at Clearpoint Credit Counseling Solutions in Atlanta, Georgia, retired on December 31. Brown managed the reverse mortgage counseling program at CredAbility, which merged with Clearpoint in 2013. She played an instrumental role over the past decade working with HUD, NRMLA and other stakeholders to enhance HECM counseling policies. She also played an active role in the development of the Certified Reverse Mortgage Professional (CRMP) designation and continues to serve on the Independent Certification Committee, which administers the CRMP program. Brown hopes to remain semi-active in the reverse mortgage space and offer assistance on the ICC and other counseling activities. We wish Brown the best of luck as she begins this new stage of her life.
New Members NRMLA welcomes the following companies that recently became members:
- Certified Credit Reporting, Inc., Ontario, California (associate member)
- LoanStar Home Lending, Bellevue, Washington (lender member)
- National Support Solutions Corp., San Juan, Puerto Rico (associate member)
- Sterling Mortgage Services of the Treasure Coast, Stuart, Florida (lender member)
- Valley West Corporation dba Valley West Mortgage, Las Vegas, Nevada (lender member)
