“We can’t do HECM for purchase right now,” says Robert Griffin of Griffin Financial Mortgage, LLC in Fort Worth, Texas, explaining that “declining values make it harder to do such loans.” In certain parts of the country like Florida, “Appraisers are having a hard time finding comps” due to a paucity of sales, according to Griffin, whose company expects to close about 400 reverse mortgages this year around the country.

“The bane in the mortgage industry is the steady free-fall in real estate values,” adds Dennis Haber, executive vice-president, Agency For Consumer Equity. “The torment being felt in the reverse mortgage industry occurs when the appraised value of the subject property falls short. This is particularly distressing to seniors who envision a move into that new home with a HECM reverse mortgage,” Haber remarks.

One long-time reverse mortgage originator points to a larger issue. “The April appraisal guideline changes have caused appraisers to over-react, taking present values even lower than necessary, in the name of ‘future declining valuation analysis’, to avoid fear-based potential future liability regarding their valuation.”

Neil J. Morse has been a communications professional working in the mortgage finance industry for more than a decade, currently specializing in the reverse mortgage sector. He can be reached at nmorse@morsecommunications.com

The ML officially implements a rule which was published last year that allows borrowers whose loans were assigned to HUD to refinance and qualify for a reduced mortgage insurance premium.  The policy applies to all loans that were assigned on or after October 6, 2008.

Additional clarifications from the ML include:

The reduced initial MIP only applies when the property that serves as collateral for FHA insurance remains the same. Therefore, HECM mortgagors who terminate their HECM and purchase a new property using a HECM for Purchase transaction are not eligible for a reduction in the initial MIP on the new property.

HUD’s HUD-92901 “Home Equity Conversion Mortgage (HECM) Anti-Churning Disclosure” must be signed by the mortgagor and be included in the FHA case binder. This form ensures that the mortgagor is not being induced to refinance his/her existing HECM without benefit to the mortgagor and/or solely for the benefit of the mortgagee.  Read the ML for more information regarding the “Anti-Churning Disclosure”.  

The ML also clarifies that HECM refinance borrowers can waive and opt out of the HECM counseling requirement only if all three of the following conditions are met:

1. The mortgagor has received the required HECM Anti-Churning Disclosure form;
2. The increase in the mortgagor’s principal limit exceeds the total cost of the HECM refinance by an amount equal to five (5) times the cost of the transaction (Block #1 on Anti-Churning Disclosure Form); and
3. The time between the closing on the existing HECM and the application for refinancing does not exceed five years.

To learn more about the the changes from ML 09-21 see the link below.

Mortgagee Letter 2009-21

According to an alert from the National Reverse Mortgage Lenders Association, there are technicalities in the Texas Constitution and related homestead laws that must be met in order to obtain a valid lien in homestead property in Texas.

An article from My San Antonio provides a bit more information noting that home equity lending was approved in 1997 by a constitutional amendment, which was followed by reverse mortgages in 1999. 

One of the Texas consumer safeguards in the constitution requires owning equity in a house before anyone can apply for a reverse mortgage, which is a form of home-equity lending. When the safeguard was drafted, no one could foresee the new home-equity-for-purchase option.

Austin, TX based Scott Norman, a MetLife Bank retail manager and president of the Texas Reverse Mortgage Lenders Association, said the Texas Mortgage Bankers Association will seek a constitutional amendment change during the 2011 session of the Texas Legislature.

Law blocks new reverse mortgage 

LTC Global made an investment in NGFS earlier this year, but terms of the investment have not been made public.  The company is an independent marketer of insurance and financial products to seniors with emphasis on Long Term Care insurance, Medicare insurance products, and most recently reverse mortgages.

In addition, Carter will assist LTC Global in identifying and evaluating additional investments and strategic relationships in the reverse mortgage space, including new banking relationships.

“We are proud to secure the services of Brett Carter, well known in the industry for his business acumen, professional integrity and good relationships with industry regulators,” said Richard Pitbladdo, co-founder of and Chief Financial Officer of LTC Global.  “We have been impressed by Brett’s track record with NGFS, a business that he helped build from scratch, and we look forward to working with Brett to grow NGFS. The reverse mortgage industry is poised for growth, and we believe we have the right team in place to take advantage of the opportunity.”

The first Advisory 2009-01 “Ethical Offers of Other Financial and Insurance Products and Services”  discusses ethical practices in which members may refer, recommend, originate or sell any other financial or insurance products. 

This guidance includes a frame for implementing HUD Mortgagee Letter 2008-24 “Requirements For Mortgage Originators”  which outlines the relevant provisions of the Housing and Economic Recovery Act of 2008  (HERA) requirements for firewalls and safeguards in offering any other financial and insurance products. Important points here include the need to act in the client’s best interest and the need to provide a bona fide advantage to the client.

The second Advisory 2009-02 “Lead Generation State Licensing Requirements and Ethical Advertising” outlines ethical practices and expectations in lead generation activities including consideration of state licensing and state laws.

This guidance also communicates NRMLA Ethics Committee’s intention to take action which may include reporting to appropriate government authorities and the public naming of any entities terminated for ethical violations in accordance with NRMLA’s Policy and Procedures.