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.

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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.

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A relatively recent test may make it appear that way, yet we’re not so sure that’s the case.

All reverse mortgage counselors are required by HUD to pass a licensing test that is proving extremely difficult, even for many seasoned veterans:

“The test is intentionally difficult, but we believe it needs to be so because of the vulnerable population” who seek out reverse mortgages, a HUD spokesman told the Post and Courier. HUD made the licensing exam more difficult after numerous complaints that people who were providing counseling about reverse loans were not always well-informed.

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We’re starting a new weekly post that’s designed to simply list and link to all the stories we wrote during the week…just in case you missed one.

Friday:

1. “With Email Scams Galore, Guard Your Password“
2. “Is it Time to Modify Modifications?“

Thursday: Read the rest of this entry »

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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