FHA Reverse Mortgage Training

Reverse Mortgage Specialist

Reverse Mortgage Changes Necessitate New Training for Lenders

In April of 2013 the Federal Housing Administration (FHA) suspended the most popular payout method of the HECM Standard. Lending institutions only had a few months to prepare for this change but most professionals believe that, in the long run, the HECM (Home Equity Conversion Mortgage) will be strengthened, although proper staff training will be essential to ensure that the lenders can adequately market the more limited HECM loan.

Reverse Mortgage lenders are aware of the impact that the changes will have on their business. Many lenders foresee an initial drop in sales followed by a strong rise as borrowers become used to the new HECM framework. Borrowers will quickly realize that, financially, the new structure is a healthier framework for long-term financial planning.

Up until April the ‘Lump Payout’ option was the choice for the majority of Reverse Mortgage borrowers. This enabled borrowers to access their loan funds as a one-time draw. A lump payout was particularly attractive to individuals who wanted to use their funds to take a trip, fix up their house or undertake other once-in-a-lifetime projects for which they required a large infusion of cash.

As of April, this option is no longer available. Congressional oversight questioned the FHA’s 16 million dollar shortfall which was due, in large part, to Reverse Mortgage foreclosures that were occurring when borrowers exhausted their one-time-draw funds and could no longer maintain their loan obligations. According to the HECM loan structure, if a borrower does not continue to maintain the home, pay home insurance and property tax payments and/or does not maintain the loan insurance payments, the loan goes into default and the lending institution forecloses on the home as the FHA absorbed the costs of those foreclosures. The Department of Housing and Urban Development, the parent agency of the FHA, agreed with Congress that changes had to be made and the first change involved cessation of the lump payment option.

Large lending institutions who use extensive marketing techniques, such as call centers, may see the steepest decline in product movement over the next year or so. The client base of these institutions often involved seniors who were attracted to the lump payment option because of the potential for a huge infusion of cash. They didn’t worry about the coming years and often found themselves in difficulties. Today, marketers believe that, as potential borrowers become more educated about the loan and its long-term effects, the market will bound back as seniors include the revised HECM as part of an overall financial plan for their future economic health.

Originators who have been marketing the entire HECM product as a whole should also not experience a severe shock to their marketing strategies as they will be able to more easily translate marketing and education efforts to explain the credit line feature.


FHA backing away from Reverse Mortgages....

2009-09-22 15:05:48 by Apprsr

FHA Looking to Decrease Its Exposure to Reverse Mortgages
Reverse mortgage lenders are learning that the Federal Housing Administration is moving quickly to implement a reduction in the loan proceeds that seniors can receive from a FHA-insured Home Equity Conversion Mortgage.
Mortgagedailynews.com

Declining home values squeeze reverse mortgages

2009-10-04 22:05:18 by Apprsr

Kenneth Harney
Sunday, October 4, 2009
(10-04) 04:00 PDT Washington - --
Declining home values have put a serious squeeze on one of the mortgage market's most popular and fastest-growing financing concepts: the Federal Housing Administration's reverse mortgage program for seniors 62 and older.
In a letter to reverse mortgage lenders Sept. 23, FHA Commissioner David Stevens said his agency must reduce the maximum amounts seniors can receive on reverse mortgages because of a $798 million estimated deficit in the program in the coming fiscal year

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