Feb 14, 2018

Trump’s Budget Would Lift Reverse Mortgage Cap, Bring Changes in ’19

As per Reverese Mortgage daily.com , Once again, the Trump administration has proposed a permanent end to the cap on the number of reverse mortgages — while also hinting at additional changes to the Home Equity Conversion Mortgage program for fiscal 2019.

“The Budget will again propose permanently lifting the cap of 275,000 loan guarantees to provide further stability for the HECM program,” the White House wrote in its proposal for the fiscal 2019 Department of Housing and Urban Development budget. “This proposal reflects the significant improvements that have been made to the program to reduce risk to the MMI Fund and to ensure responsible lending to seniors.”

The president and his Office of Management and Budget — led by acting Consumer Financial Protection Bureau director Mick Mulvaney — made the same proposal in its fiscal 2018 blueprint, issued last May.

The full document, titled “Efficient, Effective, Accountable: An American Budget,” is a largely ceremonial document; Congress just last week passed a new two-year budget plan, which the president signed.

Still, the Trump budget plan provides a window into the administration’s priorities and goals, and the HUD section dedicated a significant amount of attention to the HECM.
“The HECM program fills a special niche in the national mortgage market and offers critical opportunities for the nation’s seniors to utilize their own assets and resources to preserve their quality of life,” the document reads.

The Trump administration also heralded recent changes to the program, including the development of Financial Assessment and the new mortgage insurance premium structure, which the White House and HUD said helped to encourage lower draw amounts.
Without mentioning specifics, HUD said that officials are exploring further changes to the program for fiscal 2019.

“The president’s FY19 budget reaffirms this administration’s support of the federally insured reverse mortgage program that has helped more than a million senior homeowners supplement retirement savings and age in place,” National Reverse Mortgage Lenders Association president and CEO Peter Bell told RMD via e-mail. “Language to permanently eliminate the cap on the number of HECM loans that can be insured by FHA is a welcome signal of President Trump’s and HUD Secretary [Ben] Carson’s long-term commitment to sustaining the HECM program.”

Other HUD highlights

Overall, Trump’s preferred plan would see a 1% increase in discretionary HUD funding for a total of $41.1 billion. In addition, the government would have the authority to issue $400 billion in loan guarantees, with $12 billion set aside for HECMs.

The plan would also allow HUD to institute varying regional HECM loan limits depending on the location of the property, as well as pathway for leniency regarding spousal foreclosures.
“This provision gives the Department discretion to make deferrals on HECM loans and provides program flexibility to exempt lenders who would otherwise by required to immediately foreclose upon a living spouse,” the document reads.

To shore up the state of the Federal Housing Administration’s information technology systems, Trump proposed a new IT fee for lenders that would generate up to $20 million for improvements — or the equivalent of about $25 per FHA-backed loan

The FHA’s origination systems experienced 73 outages during 2017, the Trump administration noted, with some of its programs dating back more than 40 years.
“This places the MMI fund at significant risk, and hampers FHA’s ability to effectively partner with the industry,” the administration pointed out.

The White House plan represents a starting point for negotiations with Congress; the New York Times noted that the plan “has little to no chance of being enacted as written.”

December 2017 EHS Over Ten Years

Every month NAR produces existing home sales, median sales prices and inventory figures. The reporting of this data is always based on homes sold the previous month and the data is explained in comparison to the same month a year ago. We also provide a perspective of the market relative to last month, adjusting for seasonal factors, and comment on the potential direction of the housing market.
The data below shows what our current month data looks like in comparison to the last ten December months and how that might compare to the “ten year December average” which is an average of the data from the past ten December months.
  • The total number of homes sold in the US for December 2017 is higher than the ten year December average. Regionally, all four regions were above the ten year December average, while the Midwest and South led with stronger sales.
dec 10 avg
  • Comparing December of 2007 to December of 2017 more homes were sold in 2017 in the US and all regions, the West leading with the biggest gain of 22.5 percent. The US had an increase of 20.8 percent while the Midwest had an uptick in sales at 20.3 percent. The South had gains of 21.3 percent. The Northeast region had the slowest pace in sales over the ten year period. Since 2012 existing home sales have gradually increased year over year showing home sales have been stable leading up to 2018.
dec 2007 

dec reg
  • This December the median home price is higher than the ten year December average median price for the US and all four regions. Price growth has been steady over the last ten years.
10 yr price
  • Comparing December of 2017 to December 2007, the median price of a home increased in all regions. The South led all regions with price growth of 27.5 percent followed by the West with 20.3 percent. The US had an incline in price of 19.1 percent while the Midwest experienced a gain of 20.1 percent. The Northeast had the smallest gain of 1.9 percent.
2007 price
  • The median price year over year percentage change shows that home prices were on the decline in 2007 nationally, with the West having the biggest drop of 10.4 percent. Prices dipped by double digits in three of the four regions in 2008 in which the Northeast had the smallest decline of 9.3 percent. The West had the largest drop in prices of 25.8 percent. The trend for median home prices turned around completely in 2012, when all regions showed price gains. The West had the biggest price increase of 20.1 percent and the US showed 11.1 percent gains. The South had an increase of 9.6 percent followed by the Midwest with 9.2 percent. The Northeast had the smallest gain that year of 5.0 percent.
yoy change
  • There are currently fewer homes available for sale in the US this December than the ten year December average.  Inventory figures over the ten year time period has declined substantially having only increased for single family homes and were flat for condos in 2013.
10 inv
  • This current December the US had the fastest pace of homes sold relative to the inventory when months supply was 3.1 months. In 2007, the US had the slowest relative pace when it would have taken 9.6 months to sell the supply of homes on the market at the prevailing sales pace. This was also the case for the condo market which had the biggest challenge in when it would have taken 11.5 months and single-family 9.3 months to sell all available inventory at the prevailing sales pace.
month inv

  • The ten year December average national months supply is 6.0 while single family is 5.8 and condos are 7.1 months supply.

Feb 9, 2018

Mortgage rates jump even higher after positive jobs report

CNBC recently did an article about some of the changes the US economy has seen over the past few months. According to the report, the good news is Americans are making more money – because they're going to need it, especially people thinking about buying a home.

While the just-released January employment report showed job growth that topped expectations, to go along with a nice gain in wages, it also sent bond yields soaring. Mortgage rates loosely follow the yield of the 10-year Treasury. Bond yields have been rising for weeks on strong economic data domestically as well as changes in international monetary policy, but this move was the most dramatic.

The average rate on the 30-year fixed-rate mortgage is at its highest level in four years, about 4.5 percent, and for some lenders, it is even higher.

"This isn't a knee-jerk reaction to some headline event. It's a broad-based, deliberate move," said Matthew Graham, chief operating officer at Mortgage News Daily. "A quick return to December's levels is unlikely, even though we may get some relief on the way higher. How much higher is hard to say, but at a certain point, high rates are self-correcting. We're probably at least half-way to that magic line in the sand."

Boiling the change so far down to a monthly payment, if a borrower took out a $200,000 mortgage in the middle of December, when the average rate was around 3.875 percent, they would have had a monthly payment of $940 (that's not including taxes and insurance). If they were to take out that same loan today, the monthly payment would be $1,013.

While $73 a month may not sound like a lot to some, this is just a best-case scenario. Depending on your creditworthiness, it could be a bigger difference. For some borrowers on the margins, they may no longer even qualify for the loan. Lenders today are required to make sure the borrower has the ability to repay a loan, based on income and other expenses. If the monthly payment is even slightly higher, some borrowers may not make that ability-to-repay standard.

For those out house hunting already, the higher rates will only add to the weakening affordability in the market. Home prices continue to move higher at three times the rate of wage growth. In some large metropolitan markets, annual price gains are in the double digits.

Prices are also growing fastest at the lowest end of the market, where entry-level buyers have even less ability to increase their buying budgets. These buyers are also far more mortgage-dependent than those at the high end.

Of course, mortgage rates are still historically low, looking back over the past few decades. Rates have soared higher than 10 percent in the past, and the market survived.
The difference now is that home prices over the past few years have been able to gain so much because borrowing costs were so low. What's pushing prices higher now, however, is not low rates, but a severe lack of supply. That means higher rates are unlikely to put any chill on the rise in prices. Demand for housing is still strong, but buyers today will have to dig deeper to become homeowners.

Money Magazine says Reverse Mortgage is Good Idea

According to a recent article in Money Magazine, you don’t need fancy financial products to stretch your retirement savings. In fact, most Americans have access to the best retirement income generator around: Social Security, according to a recent report.

Researchers at the Stanford Center on Longevity, in collaboration with the Society of Actuaries, analyzed 292 different retirement income strategies and found that Social Security meets most planning goals. The authors created a retirement income strategy around Social Security, called Spend Safely in Retirement, targeted to middle-income workers with between $100,000 and $1 million in savings who don’t have significant help from a financial advisor.

Spend Safely in Retirement is designed to help wring the most from existing savings, while maximizing the guaranteed income of Social Security, writes Steve Vernon, research scholar at the Stanford Center on Longevity and lead author. Among other benefits, this strategy protects against inflation and the risk of outliving savings while minimizing income taxes and complexity.


In order to maximize Social Security, beneficiaries should delay claiming until age 70, the report says. Financial advisors have long urged clients to wait as long as possible to claim Social Security, since doing so guarantees an annual return of between 6.5% to 8.3% from age 62 to 70, according to Bruce Wolfe, executive director of the BlackRock Retirement Institute. Yet only 4% of those who started taking Social Security in 2016 waited until that age, according to the Social Security Administration.

The report suggests several strategies to bridge the income gap until age 70:
  • If possible, continue working, at least enough to cover your basic living expenses, and slash your discretionary spending to live frugally within your means.
  • If work isn’t possible, consider using a reverse mortgage line of credit as a pool of funds to help cover living expenses.
  • If outside sources of income aren’t adequate, consider building a “retirement transition bucket” with a portion of retirement savings equal to the total amount of Social Security that you’d forgo by waiting until age 70 to claim. Say you retire at 65 and would have received the average monthly benefit of $1,369 if you claimed at that age. Put roughly $95,000 into the transition bucket to cover the amount you would have received in benefits from 65 to 70, indexed for inflation. This pot should be invested in a liquid fund with minimum volatility, such as a money market fund or a short-term bond fund.
Once you reach age 70 ½, the Internal Revenue Service requires you to withdraw a minimum amount from your tax-advantaged 401(k) or IRA each year and pay ordinary income taxes on it. Think of these required minimum distributions (RMDs) as your “retirement bonus,” the report says. Just like the bonus that you might have received on the job, the amount fluctuates—in this case, with your age and the market performance of your retirement account. Your Social Security check, on the other hand, is your “retirement paycheck,” a fixed amount adjusted annually for inflation that covers basic living expenses.

Keep a hefty portion of your RMD accounts in stocks, the report recommends. If you can stomach the volatility, you can go as high as 100% equities, as this provides the most potential upside. Yet if that allocation would keep you up at night, sweating fluctuations in the market, then stick to 50% or 60% in stocks, the authors advise.

In addition to your retirement account, the report recommends that you maintain an emergency fund that wouldn’t be tapped for regular retirement income. Also, if you want to spend more money in your early years of retirement, say to travel, then set those funds aside. For example, if you budget an extra $5,000 for fun for the first five years of retirement, put $25,000 in an account that isn’t used to generate retirement income.

To be sure, this approach won’t make up for inadequate savings, Vernon cautions. And it also won’t protect retirees from catastrophic long-term care expenses, which can quickly drain savings. But other retirement income strategies would also fall short on those counts. Spend Safely in Retirement offers multiple advantages, including a simple design that most retirees can execute on their own.

Peoples Privo Processing is a nationwide processor of reverse mortgages.

Feb 6, 2018

Buyers face rising rates heading into spring housing market

As per CNBC the 30 year fix rate is rising steadily since the beginning of this year especially this week .

Price is up to 6.8 % nationally and close to double digit in some local market. The supply  crisis is a big chunk of that biting words are actually the rule now, but a lot of the supporting those prices are also low mortgage rates, so any move higher will hit today's buyers especially first time buyers hard because affordability is more dependent than ever on cheap credit. Also want to remember as these home buyers looking for prices they can afford they going to be looking for lowest rate and as rate rise that means they not only be able to pay less but they will qualify less on mortgage.

Check out the video on  CNBC

Feb 5, 2018

How to Educate Financial Advisors About the New Reverse Mortgage

As per Reverse Mortage daily, for the last several years, there has been a major industry-wide push to spread awareness among the financial advisor community about how reverse mortgages can be a powerful tool in retirement planning. But recent changes to the product that lower principal limits and change mortgage premiums have some worried that the HECM has lost its appeal among financial advisors.

While some retirement income experts admit that the new rules do change things, they insist that the HECM still has real value from a financial planning perspective. RMD spoke to several leading experts for tips on how originators can connect with advisors to educate them about the product under the new rules.

Tip No. 1: Move past the stand-by line of credit, but don’t forget it.
Jamie Hopkins, co-director at the American College’s New York Life Center for Retirement Income, says that while the changes take the steam out of the stand-by strategy, it can still be useful in some cases.
“The stand-by line-of-credit option is less attractive, there is no way around that,” he says. “The line of credit will cost more upfront to set up and will grow a bit slower than in the past… Just from talking with advisors, many are less attracted to it now with higher upfront costs.”
But Hopkins says that while its appeal is diminished, the strategy is still valid and shouldn’t be forgotten. “This still remains a very viable and useful strategy, one that is underutilized today.”

Tip No. 2: Stress the use of a HECM to pay off an existing mortgage.
Hopkins suggests originators focus on the benefits of using a reverse mortgage to pay off an existing mortgage. Explain to advisors how a HECM can be a game-changer for clients carrying a mortgage into retirement who have limited resources but want to age in place.
“For anyone considering paying off an existing mortgage with a reverse mortgage, the program just got better,” Hopkins says. “It can help solve the cash-flow issue and can be presented as a more flexible mortgage that allows for monthly payments but does not require them in the event that income or savings gets tight in a given month. This is the strategy that I think will be most widely adopted by financial advisors moving forward as it stresses the importance of cash-flow management in retirement.”

Tip No. 3: Emphasize the HECM for Purchase.
Prominent retirement researcher Wade Pfau is releasing a second edition of his book, “Reverse Mortgages: How to Use Reverse Mortgages to Secure Your Retirement,” that takes into consideration the new rules, and he says one of the topics he’ll be highlighting is the HECM for Purchase.
Pfau says the H4P program benefits from new guidelines, which dictate lower mortgage insurance premiums and a slower growth of the loan balance.
“I provide a case study about the HECM for Purchase and show that it can increase the probabilities for overall retirement success compared with strategies that would [have seniors] pay cash for the home or use a 15-year traditional mortgage to finance the home,” Pfau says. “The reason for this relates to the role of the HECM for Purchase program to reduce exposure to sequence of returns risk in retirement, which is a very important concept for advisors to understand when they are providing guidance to retiring clients.”

Tip No. 4: Curtail price concerns by focusing on how the product has been improved.
While taking out a reverse mortgage can be more expensive than other options in some cases, some experts insist the value is still there. The trouble for originators will be getting advisors to see past the price.
“Strategically combining a HECM opened sooner can help support more efficient retirement outcomes, even if the full retail upfront costs of the reverse mortgage must be paid,” Pfau says. “It is only through this type of education that I hope planners can start to overcome the new sticker shock.”
Shelley Giordano, a member of the Funding Longevity Task Force who has spent years working to promote awareness among financial planners, says it’s important to stress how the product has been improved.
“I think a lot of people have assumed that just because it costs something to set it up, the discretionary client is out the window. But that’s not the case,” Giordano says. “The product is so much better now, but this isn’t something that can be conveyed in a headline or in a TV ad; it requires us to sit in front of a financial advisor and discuss it.”
“Your sales force has to articulate that the changes are positive,” she says. “Yes, there’s a little bit more upfront cost for a whole lot of protection, but less overall cost to the customer. If you can explain that correctly, they will understand it.”

Tip No. 5: Educate, face to face.
Giordano says originators who can develop a solid connection with advisors and take the time to meet them one-on-one will have greater success.
“We have a lot of work in front of us. Lenders that have built real relationships with financial advisors will have a lot less difficultly continuing with their business, because they are able to sit with the financial advisors belly-to-belly and explain what has happened,” she says. “So there is definitely hope. But is it a hard job? Hell yes.”

Hopkins insists that this education is crucial. “Financial planners need to understand the benefits of reverse mortgages, and the recent changes did nothing to change the importance,” he says. “Clients have so much of their wealth tied up in home equity that it just can’t be ignored.”