The Federal Housing Administration (FHA) has announced some significant changes to its loan programs and policies, making FHA loans more costly for borrowers and easing the pressure put on the agency’s Mutual Mortgage Insurance Fund as a result of the U.S. housing crisis. Changes will take effect April 1.
Here’s a summary of the changes: Read the rest of this entry »
Seniors who want to tap their home equity through a reverse mortgage might want to keep a close watch on the Federal Housing Administration (FHA).
The Home Equity Conversion Mortgage (HECM) program, a reverse mortgage backed by the FHA, is showing signs of substantial stress, and U.S. Department of Housing and Urban Development (HUD) Secretary Shaun Donovan has a plan to relieve the pressure. Read the rest of this entry »
There was a big commotion last week when HUD announced that the reserves “used to support FHA’s single family mortgage and reverse mortgage insurance programs fell below zero to -1.44 percent. This represents a negative economic value of $16.3 billion.”
In fiscal 2012, the government accounting calendar which just ended, the FHA insured 1,239,874 loans. Most of these were “forward” loans, the 15-year mortgages and 30-year mortgages that most of us consider when we buy or refinance real estate.
In the next few weeks, we will find out how the FHA’s reverse mortgage program has done in the past year. This is an important benchmark because the reverse mortgage program has lurched along, creating big losses for the FHA and its reserve system.
Earlier this month, Moody’s Investors Service downgraded $5 billion of Home Equity Conversion Mortgage (HECM) bonds, a ratings change which ought to catch the attention of someone at HUD.
While the FHA mortgage program has been doing better in general, the situation with reverse mortgages is very different–claims for HECMs are up 64.6 percent. Read the rest of this entry »
The FHA’s reverse mortgage program has undergone a number of changes in the past year, and now HUD says more are to be expected.
HUD is also telling reverse mortgage lenders they can add additional requirements above the FHA standard to help reduce program claims…or are they? Read the rest of this entry »
Following in the steps of Bank of America and Financial Freedom, another huge lender has announced that it will no longer sell reverse mortgages.
Wells Fargo says it’s leaving the reverse mortgage business. It will no longer sell home equity conversion mortgages (HECMs), reverse mortgages sold to those aged 62 and above and insured by the FHA. The company will continue to service current borrowers.
A recent report from the National Consumer Law Center (NCLC) warns that the reverse mortgage industry could very soon become the new subprime. The report claims that former subprime lenders have altered their business model in order to cater to reverse mortgages instead. While the products are very different in their makeup, the NCLC says the ways in which subprime and reverse lenders attract customers may be the same:
Some of the same U.S. lenders that helped drive the real estate boom with loans to home buyers who couldn’t afford the payments are now targeting seniors, the center said. Brokers, who are given financial incentives to sell the loans, may be making misleading claims to potential customers, according to a report titled “Subprime Revisited,’’ that was released today by the Boston-based NCLC.
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