Friday Round-Up: Reverse Mortgage Rate Volatility, Higher 2017 Lending Limits

Another busy week in the books for the reverse mortgage industry. This week, the Federal Housing Administration announced it would raise lending limits for reverse mortgages, industry members discussed opportunities to simplify key terminology, and marketing experts considered the best strategies to educate the forward lending market.
Needless to say, a lot has happened in the past week. But fear not, because RMD has you covered with the most popular reverse mortgage news stories grabbing readers’ attention.
Get up to speed on the latest industry happenings and check out these top stories from the past few days:
Reverse Mortgage Loan Limit to Increase in 2017—After several years of stagnant reverse mortgage lending limits, the Federal Housing Administration will raise limits “slightly” in 2017, the agency announced Thursday via Mortgagee Letter 2016-19. For Home Equity Conversion Mortgages (HECMs), the maximum claim amount will rise to $636,150, up from the current limit of $625,500.
Rate Volatility Cranks Up the Pressure on Reverse Mortgage Lending—Rising short-term interest rates have a minimal impact on reverse mortgage borrowing compared to conventional mortgage lending, but recent volatility in longer-term expected rates is a cause for concern among both reverse mortgage lenders and borrowers alike.
Is the Reverse Mortgage Industry Using the Right Terminology?—As the reverse mortgage industry strives to improve the customer experience for borrowers and their families, there are some aspects of the HECM program that may benefit from simplification, according to several industry members during a recent conference last month.
How Reverse Mortgage Marketing Must Speak to the ‘Forward’ Business—Generally, someone in the market for a conventional mortgage may not necessarily be interested in a reverse mortgage, however, getting information about these loan products into the “forward” lending space is especially important when it comes to further educating the public, as well as traditional loan officers, about reverse mortgages, according to a recent panel discussion among industry marketing experts.
Reverse Mortgage Growth Still a ‘West Side’ Story Despite Sluggish Industry Volume—With only a few months left in 2016, some markets are reporting reverse mortgage volume growth as the industry heads into the final throes of the year. But much of this growth continues to be concentrated in key western and southern U.S. states and cities, industry data suggest.
Written by Jason Oliva

Reverse Mortgage Loan Limit to Increase in 2017

After several years of stagnant reverse mortgage lending limits, the Federal Housing Administration will raise limits “slightly” in 2017, the agency announced Thursday via Mortgagee Letter 2016-19.
For Home Equity Conversion Mortgages, the maximum claim amount will rise to $636,150, up from $625,500. The amount is 150 percent of the national conforming limit of $424,100, the Department of Housing and Urban Development noted in a press release detailing the changes.
Loan limits for forward mortgages will also rise in some areas under the new schedule. In high-cost areas, the FHA national loan limit ceiling will increase to $636,150 from $625,500, and FHA will increase its floor to $275,665 from $271,050.
The changes are being implemented due to rising home prices, the agency said. The “floor” and “ceiling” changes will impact 2,948 counties across the nation, while in 286 counties the loan limits for forward mortgages will remain unchanged.
The national loan limit floor is set at 65 percent of the national conforming loan limit, which applies in areas where 115 percent of the medial home price is less than 65 percent of the national conforming loan limit, HUD noted.
Loan limit changes and the maximum claim amount change for reverse mortgages will apply to case numbers issued on or after January 1, 2017. The new limit is in effect through December 31, 2017, according to the mortgagee letter.
View HUD’s loan limits page for more information.
Written by Elizabeth Ecker

‘Tis the Season for Reverse Mortgage Jobs—Lenders Now Hiring

The holiday season is upon us, and like most years, it’ll blow past us sooner than we realize. But don’t let the hustle and bustle of the season keep you from taking advantage of the growing job opportunities for reverse mortgage professionals.
As we enter the last month of 2016, reverse mortgage lenders nationwide continue their search for skilled professionals to join their teams, offering positions for loan originators, wholesale personnel, processors underwriters and more.
Finance of America Reverse, Senior Funding Associates, Lenox Financial Mortgage and are just a few companies currently looking to grow their teams with skilled personnel—but they aren’t the only ones.
Click the following opportunities that are now open to find out more. Or for a complete list of jobs, visit the Reverse Mortgage Daily Job Board.

Wholesale Loan Account Manager/Processor – Finance of America Reverse
California Reverse Mortgage Originators – Senior Funding Associates
Reverse Mortgage Loan Officer – Lenox Financial Mortgage
Reverse Mortgage DE Underwriter (Remote Availability) –
Inside Reverse Mortgage Loan Officer – HighTechLending d.b.a. AmericanSenior
Reverse Mortgage Loan Processor – HighTechLending d.b.a. American Senior
Reverse Mortgage DE Underwriter – HighTechLending d.b.a. American Senior
Reverse Mortgage Loan Officer – 1st National Reverse Mortgage
National Sales Manager – Nationwide Equities Corp.
Reverse Mortgage Underwriter (Remote) – Nationwide Equities Corp.
Relationship Manager – Reverse Mortgage Funding LLC
Reverse Mortgage Closer – Reverse Mortgage Funding LLC
Jr. Underwriter – Reverse Mortgage Funding LLC
Mortgage Coordinator – Reverse Mortgage Funding LLC
Loan Closer – Open Mortgage

Visit our website for additional opportunities in the reverse mortgage industry.
The best and the brightest read RMD. Want them to join your team? Post your jobs to the Reverse Mortgage Daily Job Board today!
Written by Jason Oliva

Rate Volatility Cranks Up the Pressure on Reverse Mortgage Lending

Rising short-term interest rates have a minimal impact on reverse mortgage borrowing compared to conventional mortgage lending, but recent volatility in longer-term expected rates is a cause for concern among both reverse mortgage lenders and borrowers alike.
The expected rate on a Home Equity Conversion Mortgage is not the rate at which the loan accrues interest. Rather, these rates are tied to calculating the Principal Limit and as such, they are used to determine the amount of loan proceeds available to borrowers.
As these rates increase, the less money HECM borrowers are be eligible to receive. So while rising expected rates stand to adversely impact reverse mortgage borrowers, the implications for lenders will result in slimmer profits and roadblocks to future loan production.
Expected rates for adjustable-rate HECMs are based on the London Interbank Offered Rate (LIBOR) Index. When calculating the expected interest rate on LIBOR-indexed HECMs, lenders use the 10-Year LIBOR swap rate.
The 10-year swap rate used for calculating the LIBOR HECM principal limit was 2.18% as of Tuesday, November 29, 2016, up 0.06% from the previous week. This means that LIBOR HECMs with a margin of 2.88% or less can pay the maximum principal limit, according to weekly rate data compiled by Ibis Software Corporation, which regularly tracks rate activity associated with HECMs.
Though the expected rate is still below the Department of Housing and Urban Development’s “floor” of approximately 5%, rates have been ticking upward since the beginning of the month. Just a few weeks ago, the rate dipped as low as 1.68% as of November 8.
The complexities of a fluctuating expected rate bring a multitude of challenges to reverse mortgage originators and their customers, said Cliff Auerswald, president at All Reverse Mortgage.
“When the expected rate moves above the floor, originators will need to offer lower margins to maximize a customer’s principal lending limit,” Auerswald said.
Because lower margins yield less profit to the lender, Auerswald says originators will also be challenged to become more conservative in their pricing models. As a result, this could lead to a reduction of incentives such as closing cost credits, which will raise costs to the customer and subsequently lower their net principal limit.
“A rise in closing costs and lower proceeds will have a significant impact on those qualifying with high mandatory obligations as those who need every bit of their principal limit to retire existing mortgage obligations may find themselves at a shortfall,” Auerswald said.
Unlike the forward market, reverse mortgages lenders are not allowed to pre-lock loan interest rates. Typically, lenders must wait for the appraisal to be conducted on the applicant’s property and the loan has to be approved in underwriting before they can lock-in rates.
This presents yet another obstacle for reverse mortgage lenders, many of whom are facing appraisal delays as long as 4-8 weeks, and even beyond, in certain markets. By the time the appraisal is completed, it is likely that the interest rate quoted to a loan applicant will not be the same as it was earlier in the application process.
Other reverse mortgage product offerings, such as the HECM for Purchase, will also be challenged by expected rate volatility, particularly for those waiting on new construction since an originator is prohibited from taking an application before the Certificate of Occupancy is issued, and therefore, also unable to lock the principal lending limit for 120 days.
“There are a lot of moving parts to the expected rate and application process, but the best advice for any originator would be to educate your customers before application on these market conditions, which better sets expectations in a changing interest rate environment,” Auerswald said.
Written by Jason Oliva

Bankrate: Top Questions All Reverse Mortgage Borrowers Should Ask

Education is vital when it comes to understanding reverse mortgages and to become educated, potential borrowers must ask the right questions. While there are certain parts of the loan process that are self-explanatory, others are more complex and require prospective borrowers to ask certain key questions before moving forward with a reverse mortgage, according to a recent Bankrate article.
Bankrate suggests potential borrowers should ask six questions, which address much of the misinformation about the reverse mortgage product. Arguably the most important question a borrower should ask him or herself before starting the process is “Who am I working with?” the article says.
Borrowers should be shopping around for a company that fits best with their needs. An important designation to look for is if a lender is a member of the National reverse Mortgage Lenders Association (NRMLA), the article points out. Another tip is to check out the lender’s rating with the Better Business Bureau.
Another important question that many people are misinformed about is if they will still own their home if they take out a reverse mortgage.
“Borrowers still have this perception that if you get a reverse mortgage loan the bank is going to own your home,” Paul Fiore, executive vice president of sales for American Advisors Group, said in the article. “And that’s absolutely not true. It’s no different than a traditional mortgage.”
Lenders should explain to borrowers how a reverse mortgage will affect their heirs.
“It’s a complex issue that is affected by whether you have a co-borrower, whether you are married to someone who is not a co-borrower, and whether the last borrower dies while living in the home or moves out permanently before then,” the article states.
Another important point that should be discussed from the beginning with potential borrowers is that a reverse mortgage will not solve all of their issues. Yes, a good loan officer will want to help you solve all of your issues with the loan proceeds, but nothing is guaranteed.
“With these questions, the loan officer and the borrower can discuss whether it’s a good idea to get a reverse mortgage loan, and if so, if now is the time or if it would be better to wait,” the article states. “They can discuss whether to get a fixed-rate or variable-rate loan, and which type of payout would be best: a lump sum, a line of credit, monthly payments or a hybrid of a line of credit and monthly payments.”
Borrowers as well as good lenders should be on the same page when it comes to education about the reverse mortgage product. In the end, as a loan officer, withholding vital information or not answering questions in full can be detrimental to the borrowers experience and future opinion of the product.
View Bankrate’s top questions that consumers should ask when considering a reverse mortgage.
Written by Alana Stramowski

Reverse Mortgage Growth Still a ‘West Side’ Story Despite Sluggish Industry Volume

With only a few months left in 2016, some markets are reporting reverse mortgage volume growth as the industry heads into the final throes of the year. Much of this growth is concentrated in key western and southern U.S. states and cities.
Home Equity Conversion Mortgage (HECM) endorsements finished the third quarter of this year with 36,280 loans year-to-date through September 2016, a decrease of 17.1% compared to the same nine-month period in 2015, according to the latest HECM Trends report from Reverse Market Insight.
Despite the fact that 2016 is poised to be one of the lowest calendar years for HECM endorsements in the last decade, certain markets have continued to show promise amid the broader industry-wide declines, with others entering new growth territory through the third quarter.
Colorado continued to post impressive growth this year with 1,396 HECM endorsements through September, representing a year-over-year increase of 30.8% from 2015.
In terms of unit count, Colorado ranked fifth overall among the top U.S. states for volume, bolstered by its largest metro, Denver, whose 314 loans comprise approximately 22% of the state’s endorsement volume and signal a 52.4% year-over-year growth.
Washington was the only other state to report an increase in reverse mortgage volume over last year. Through September, the state’s 1,042 endorsements are 2.2% higher than the comparable period in 2015.
The first nine months of 2016 also saw big year-over-year declines among many of the top states on the east coast, including New York (-35.6%), Pennsylvania (-36.9%) and New Jersey (-35.7%).
Texas, however, though it reported a 9.9% decrease in 2016 through September compared to last year, saw some growth in the Houston and Austin markets. Year-to-date, Houston reported 304 total endorsements for an increase of 3.4% year-over-year, while Austin totaled 172 units for a growth of 21.1%.
Together, Houston and Austin account for 17.2% of Texas’ HECM endorsement volume in 2016 through September.
See where other states, cities and counties rank through the first three quarters of 2016.
See where other states, cities and counties rank through the first three quarters of 2016 here.
Written by Jason Oliva

HuffPost: Reverse Mortgages Help Homeowners Hedge Property Value Risk

One of the greatest advantages for homeowners is the opportunity to grow their home equity as their property value increases year over year, and potentially use that wealth to support themselves in retirement.
But one way homeowners can hedge property value risk is by using a reverse mortgage, according to a recent article written by Jack “The Mortgage Professor” Guttentag, professor of finance emeritus at the Wharton School of the University of Pennsylvania in the Huffington Post.
When it comes to the Home Equity Conversion Mortgage (HECM), the government assumes a home will appreciate by 4% a year, which is used in calculating the amount a senior can draw using the loan, Guttentag wrote.
“The individual taking out a HECM reverse mortgage today could experience 4% appreciation, but more likely the rate will be higher or lower,” he said. “The way the program is designed, the borrower is protected against the adverse consequences of a rate below 4%, and allowed to enjoy the benefit of a rate above 4%.”
This is how the program allows a homeowner to hedge his or her property value risk.
Guttentag creates a scenario for Jane Doe, age 65, who has a home worth $200,000 and wants to draw the maximum amount possible every month for as long as she lives in the house.
Relying on data provided by five lenders who share pricing information on Guttentag’s website, he then compares two “extreme” possible situations about the future value of Jane’s property.
In the first situation, Jane’s home does not appreciate in value and her home’s worth remains at $200,000. Her HECM debt, however, grows each month. Assuming the initial interest rate on her reverse mortgage continues, Guttentag estimates that her debt exceeds $200,000 in the 18th year of the loan, and if she lives to 90, she will owe about $335,000.
“Since there are no deficiency judgements against Jane or her estate, the loss is taken as a charge against the Government’s reserve account,” Guttentag writes. “In sum, Jane continues to receive the payment calculated on a 4% appreciation assumption, even though her house has not appreciated at all.”
In the second, alternative situation, if the home appreciates at a rate of 8%, then after 10 years Jane’s home will be worth about $432,00. At this point, she will owe about $96,000 on her HECM, according to Guttentag’s scenario.
“Her equity at this point is the difference of $336,000, which is more than when she took our her HECM, and she is now 10 years older with a shorter life expectancy,” he writes. “If she refinances after 10 years, which means paying off the balance on the first HECM, her new monthly payment is $1,024, or almost twice as much as the payment on her first HECM.”
“The refinance option allows Jane [the homeowner] to profit from the atypically high appreciation rate on her home,” Guttentag added.
Read the full article published by the Huffington Post.
Written by Alana Stramowski

Is the Reverse Mortgage Industry Using the Right Terminology?

As the reverse mortgage industry strives to improve the customer experience for borrowers and their families, there are some aspects of the Home Equity Conversion Mortgage (HECM) program that may benefit from simplification.
The HECM program has undergone significant changes throughout its 27-year existence, especially in the last five years alone. But amid all of the programmatic updates, the product’s terminology largely has remained the same.
Even the term “reverse mortgages” carries a negative connotation, in the sense that a person using this loan is “moving backwards,” argued industry members during the National Reverse Mortgage Lenders Association’s (NRMLA) 2016 Annual Meeting & Expo in Chicago this month.
“A reverse mortgage is something you earn,” said Marty Bell, senior vice president of marketing and communications for NRMLA. “You spend your whole life working and paying for it—it’s a privilege. We need positive language expressing what it [reverse mortgage] is.”
While distinctive terminology is necessary to distinguish reverse mortgages from their conventional mortgage counterparts and home equity lines of credit (HELOCs), industry members argue that congruous terms that are used in both the forward and reverse sectors communicate a consistent message that can help alleviate confusion.
Terms like “underwriting” and “origination fee” should remain unchanged, reverse mortgage industry members agreed, in efforts to be consistent with their meanings in the conventional mortgage market.
Key HECM terms, however, such as “Maximum Claim Amount” and “Principal Limit” garnered a few suggestions from audience members, who proposed renaming these terms “FHA Lending Limit” and simply “Available Proceeds.”
Industry members also sparred over new names for mandatory HECM “Counseling,” proposing in its place terms such as “Tutors,” “Navigators,” “Consumer Education,” and “Orientation.”
Rethinking key terms also means taking a fresh look at terminology used in reverse mortgage marketing. For example, marketers have routinely touted the “no monthly mortgage payments” feature of HECMs. Although this is a critical attribute of reverse mortgages, this messaging can sound too good to be true for an already distrusting consumer.
“There needs to be a conscious movement to retool that terminology and talk about a flexible payment feature, where you can pay as much or as little as you like, or make no monthly payments at all,” said Jean Noble, chief marketing officer at Reverse Mortgage Funding LLC. “That message really resonates with the customer base because they feel like they have flexibility and control.”
From a legal standpoint, renaming the reverse mortgage product is a tall order for the industry, as regulators like the Consumer Financial Protection Bureau can be sure to continue keeping a watchful eye on the marketing practices of lenders—not to mention the significant investments lenders have made to market “reverse mortgages” over the years.
But while a complete name overhaul may be years down the road, there is an immediate opportunity for lenders to revamp their marketing approaches with a renewed focus on providing better, free education to prospective borrowers without pushing a sales agenda.
“Reporters and consumers are thirsty for good, agnostic and organic content,” Noble said. “It’s up to all of us to make sure that is readily available as they are evaluating and shopping for their options. If we start making a conscious effort to make education available, people will be eager to learn more.”
Lenders who serve as an educational resource for prospective borrowers are also likely to see those individuals return when the time comes to actually make a buying decision, said Tom Evans, vice president of marketing at Finance of America Reverse.
“Just because you aren’t getting an immediate lead form out of someone doesn’t mean you won’t get a customer for life,” Evans said.
Written by Jason Oliva

U.S. News: How Reverse Mortgages Can Save Retirement

It is no secret that baby boomers are underfunded for their upcoming retirement needs, but a reverse mortgage could be a viable option to supplement retirement income, according to a recent article by U.S. News & World Report.
One area that many people aren’t accounting for as they age is their life expectancy. Many underestimate how long they will live and how much health care costs will be as they age, the article points out.
“Although we are living longer, we are also experiencing more health issues with our increased life expectancy,” David W. Johnson, associate professor of finance at the John E. Simon School of Business at Maryville University in St. Louis, said in the article. “The typical 65-year-old couple will need $305,000 to cover out-of-pocket expenses. Increased life expectancy and unexpected expenses increase the possibility of outliving your assets.”
Reverse mortgages could be a very helpful tool in retirement and more specifically, the Home Equity Conversion Mortgage (HECM). A HECM may be a safer option because it is regulated by the government, but there are still differences among companies selling the HECM product, the article points out.
The basics of a HECM loan are discussed throughout the article, including the fact that borrowers must be at least 62 years old to be eligible and that the loan will become due and payable when the last remaining borrower permanently leaves the home.
Another point consumers should be aware of is how much to expect to receive from a reverse mortgage, assuming they qualify.
“Depending on their age, homeowners typically can tap between 50% and 75% of the home’s appraised value, with a maximum loan limit of $625,500,” Tom Dickson, national leader of the financial advisor channel at Reverse Mortgage Funding, said in the article. “The older the borrower and the lower the interest rate, the higher the available loan amount.”
There are many ways to tap into the funds, such as a HECM line of credit, but overall, education is the most important aspect of the program. Borrowers need to educate themselves before signing anything and should shop around, because even though there are about 10 companies that do most of the business in the industry, no two HECM lenders are the same, the article points out.
Read the full article from U.S. News & World Report.
Written by Alana Stramowski

How Reverse Mortgage Marketing Must Speak to the ‘Forward’ Business

Generally, someone who is looking for a conventional mortgage is not necessarily interested in a reverse mortgage, but getting the information into the “forward” space is especially important to further educate the public as well as traditional loan officers about reverse mortgages, according to industry marketing experts.
The number one hurdle is still education, Tim Harder, vice president of business development at 1st Reverse Mortgage, said at the 2016 National Reverse Mortgage Lenders Association (NRMLA) 2016 Annual Meeting & Expo.
“The discussion today is about education for the forward mortgage loan officer,” Harder said. “A lot of them feel that this is the loan for, as they say, old people, or the loan of last resort.”
A majority of forward loan officers believe that reverse mortgages are not an option as part of a holistic financial plan, said Harlan Accola, CRMP, national reverse mortgage director at Fairway Independent Mortgage Corporation.
“Some of them [forward loan officers] are out there telling clients not to get them,” Accola added. “That’s what I found out when I came to Fairway, that loan officers just didn’t know what they didn’t know and they would specifically advise against it.”
A vital marketing tool
In addition to educating those within the mortgage industry about reverse mortgages, another way lenders are breaking down barriers is by instead of looking at how to sell a reverse mortgage to someone who is interested in a forward mortgage, they are looking at the product more as a marketing tool, Harder explained.
“It’s not so much about the [reverse mortgage] loan right now, it’s more about using the reverse mortgage as a marketing tool to allow them to get in front of more real estate agents, more builders and more financial planners to promote all of the products they have,” he added.
Exposure is also a huge component to marketing the reverse mortgage product to the forward space, explained Ken Krajewski, managing director and head of reverse mortgage lending at The PrivateBank and Trust Company.
If a company is part of a bank that does do forward mortgages, getting to know the bank tellers can work to get the education out there about the product.
“Every bank should be some place we [reverse mortgage professionals] are approaching,” Krajewski said. “We talk to bank tellers a lot about those customers who are overdrawing their accounts—that’s a great opportunity to talk about reverse mortgages. When you see people coming in and cashing in their CDs, that’s another great opportunity to talk about the product.”
Talking to the bank tellers about when Social Security checks are sent out and stopping into a location on that day when people are cashing those checks is another great time to educate people about the reverse mortgage product, Krajewski adds.
Looking toward 2017
As we move into the new year, 1st Reverse Mortgage is taking the approach of sharing the reverse mortgage product as a “new offering” to the forward mortgage industry, where there are limited new products coming out.
“Unlike 2007 and 2008 when there was a plethora of new products out there, there really isn’t a ton of new products in the mortgage industry right now,” Harder said. “If refi volume drops down, the forward mortgage side of the business is going to wake up and a reverse mortgage could be seen as a new product for someone who has been avoiding us or shying away from the reverse product in the past.”
Just getting a business card out there from the reverse mortgage industry will stand out among all of the realtors and forward mortgage business cards, Krajewski explained.
“Nobody else has a reverse mortgage card,” he said. “You can talk to 100 realtors; they don’t know one reverse mortgage person. Try to be that one reverse mortgage person.”
The product does sound a little too good to be true, Krajewski adds. But while it is too good to be true, people should be getting out there and educating the public as well as all the other professionals who are valuable contacts for the reverse mortgage industry.
Written by Alana Stramowski