HUD Proposes New Rule to Change Broker Approval Process

In a new HUD rule proposed today, HUD seeks to change the process to become an FHA approved lender, among other things. Whereas currently the FHA approves both mortgagees and correspondent lenders, the new rule would streamline the approval process so that the FHA will only approve mortgagees. Correspondent lenders will then need to be “sponsored” by an FHA-approved mortgagee, with the sponsoring lender assuming responsibility for the loan correspondent. This means that the sponsoring lender would be responsible for insuring that the FHA loans from the loan correspondent meet FHA standards, correspond with the HFSH Act’s requirements and meet the requirements for integrity and financial soundness. If the loan correspondent is found to be out of compliance, the FHA-approved mortgagee would be liable for sanctions.

The new HUD rule also increases the net worth requirements for FHA-approved mortgagees from $250,000 to $2.5 million over three years. The changes will also apply to those applying for FHA mortgagee approval.

The FHA is soliciting public comments on the proposed rules via mail and email through December 30, 2009, a period of 30 days as opposed to the usual 60 days. The proposed changes are unsurprising, as the FHA has seen an unprecedented number of lenders applying for approval in the last two years, and there is already a huge backlog of lenders waiting to be approved. The proposed changes will hopefully help reduce FHA’s workload while allowing more lenders to originate FHA loans (though likely as correspondent lenders instead of full-fledged mortgagees).

The proposed rule can be found in its entirety here.

Treasury Announces Plan to Increase Pressure on Banks to Modify Mortgages

The U.S. Treasury Department announced Monday that it would increase the pressure on mortgage servicers and banks to modify delinquent mortgages. Mortgage servicers will now be required to submit plans to the Treasury department indicating how they intend to determine which loans will be permanently modified. Banks that fall short of the guidelines they submit could face fines or sanctions. The changes are intended to help the troubled Making Home Affordable Program. While promising to help keep three to four million homeowners in their homes, the program has so far only submitted test modifications to 650,000 borrowers, of which about 375,000 were scheduled to convert to permanently reduced payments by the end of the year. These numbers are seen as a colossal disappointment.

In addition, the Treasury Department will begin releasing data showing the permanent number of modifications issued by bank. This move is meant to shame banks into modifying more loans. The current report only shows temporary modifications.

The Making Home Affordable program has been plagued by reports of a “phone tree hell” and bureaucratic disorganization. However, the program has also suffered, as unemployment numbers remain high, causing many borrowers with good credit scores to have difficulty making their mortgage payments. While the program was initially designed to help combat option ARMs and sub-prime mortgages, the foreclosure epidemic has extended beyond these types of borrowers and mortgages.

Case-Shiller Index Nearly Flat in September

Standard & Poor's Case-Shiller Index was nearly flat in September, after large gains in July and August. While many analysts appear disappointed with the news, expecting a W in the trend, rather than the previously hoped for V, others are still excited. As Grant Stern, a mortgage loan officer in Florida, said, "Nobody expects a 50 percent gain. Flat is the new up." Still, with the Case-Shiller index covering a three month average, strong July and August numbers could mean that prices plummeted in September.

Regardless of how much the Index moved this past month, it is still nearly 10% below levels from a year ago and 29.1% below its height at the peak of the boom in 2006. Some of the hardest hit areas, such as Las Vegas, have seen prices down more than 50% since the peak of the boom. Prices in Las Vegas have declined for 37 straight months.

The sobering news about housing prices comes in spite of the strong existing home sales in October. It will be interesting if prices in October fall as well when the Case-Shiller Index is released for October next month. Yet, this seems like a definite possibility.

The NRMLA Annual Conference Free Stuff Awards

The NRMLA Reverse Mortgage Conference in San Diego last week was filled with lots of the best part of any conference, great free stuff. Some of the highlights included:

-Premier Reverse Closings' (PRC) laughing pens, though they may have totally freaked out my friends.
-Bank of America's home office kits. The pens, stapler, mini three hole punch, tape dispenser, and other treats are really useful.
-Nations Lending Services chocolates. The chocolates from Judy's Candy Co. look soooo good. Caramel, chocolate, and marshmallow... the perfect combination.

However, my favorite free giveaway at the conference was from Springboard. Their calendar and book of post-its is original and will be incredibly useful-- especially to a post-it addict like myself.

Other highlights at the Expo included the Air Hockey Tournament (or at least, the attempts at the Air Hockey Tournament) by PRC, the warm chocolate chip cookies at Lender's Reverse Closing Services, the Wii Frisbee tournament, and the Wii at AppraiserLoft.

October Home Sales Spike Significantly

The National Association of Realtors (NAR) announced today that existing home sales in October rose significantly, rising 10.1% in October compared to the month before. An increase of this level has not been seen since February 2007, before the collapse of the housing bubble. Analysts with Bloomberg news were expecting a gain of only 2.3%.

While many factors can be attributed to the large rise in existing home sales, such as the extension of the tax credit, significant inventory, and low prices, it's hard to imagine the prices remaining this high for an extended period of time. Furthermore, the article pointed out an important caveat: with one in ten homeowners behind on their mortgage, it's hard to be sure that this spike will either be sustained or will provide the boost to the rest of the economy that many analysts are hoping for. The next few months will prove extremely important in proving whether or not the market is really on the rise again, or whether the changes are temporary or seasonal.

NRMLA Conference Recap: Day 3

The third and final day of the NRMLA annual conference had great nuggets and good times. While the first two days of the conference had more definite tracks, the third day had a number of smaller sessions occurring simultaneously in the morning, followed by one final general session.

Though by the last session, most of the attendees had already left, the last half day was still extremely helpful and productive. The double session workshop on reverse mortgages in California was in depth, interactive, and very interesting. It made many of the problems surrounding the California legislation abundantly clear-- a topic that will be revisited later this week. Without going into the details though, I will add that it was a great idea of NRMLA to add a specialized session on a topic that is clearly controversial. I hope NRMLA will add workshops for other states as the situation merits it.

The last session of the conference was (arguably) a pep rally encouraging attendees to get more involved in lobbying and legislative efforts within the reverse mortgage industry. Encouraging attendees to meet their representatives and senators was a good message. It was refreshing to hear the positive receptions many of those in attendance had received from their legislators. In an industry with so much regulation, the idea of empowering ourselves to act and take the initiative in getting to know the decision makers was an important and appealing one.

As the conference closed and the attendees left to head back to their homes throughout the country, NRMLA certainly provided enough to keep the industry occupied for awhile... and left us waiting expectantly for next year in New Orleans.

FHA Mortgage Insurance Changing Real Estate Landscape

An article in the New York Times on Thursday exposed how the low down payments required for FHA insured mortgages were changing the mortgage and real estate markets-- and not necessarily for the better. Up until the loan limits were raised in the Economic Stimulus Act of 2008, the FHA mortgage insurance program tended to focus on loans in low cost states, primarily in the middle of the country. Texas and Michigan were prime candidates. Now that the loan limits have been increased to $729,750-- a limit extended through April 2010 along with the HECM limits-- FHA insured mortgages are proliferating along the coasts as well. A statistic shown at the NRMLA Reverse Mortgage Conference yesterday gave the FHA a 30% market share of the mortgage market nationwide.

But there is a problem: the Mortgage Bankers Association (MBA) announced yesterday that nearly 1 in 10 homeowners with mortgage payments are delinquent. That's a record high. More than 1 in 6 FHA borrowers are delinquent, a higher percentage than the national figure. As such, the continued proliferation of FHA insured mortgages with extremely low down payments paves the way for further problems for an agency that already has reserve levels below the federally required minimums.

FHA mortgage insurance can help a lot of buyers find their way into new homes, but the difference between a 20% down payment (the amount generally required by private lenders) and a 3.5% down payment (the amount generally required for an FHA insured mortgage) is a significant one. With such a low down payment, it is far more likely that buyers will wind up in homes they cannot afford.

The reverse mortgage industry should keep an eye on this phenomenon as well. Since forward mortgages and reverse mortgages have been considered in much of the same legislation, any changes to loan limits or mortgage insurance (MIP) is likely to effect reverse mortgages as well.

NRMLA Conference Recap: Day 2

Day 2 of the NRMLA Conference was jam packed. With sessions running from 8:30 in the morning to 5:30 at night, followed by a full evening of parties, it was hard to go through the day without meeting new interesting people or learning something new. Some highlights included a useful session on press releases (which had a strong focus on SEO and web marketing), a phenomenal session with a representative of HUD's Office of the Inspector General (OIG), and a really interesting section on financial planning, elder care, and how reverse mortgages fit into the picture.

With one day left to go, one can only hope that tomorrow continues the positive trend begun the last two days. It is exciting to see what NRMLA has in store.

NRMLA Conference Recap: Day 1

The NRMLA Annual Reverse Mortgage Conference appears to be off to a great start. With around 650 attendees, the conference makes the regional conferences look tiny in comparison. The booths in the exhibition hall have also been a lot of fun, with an air hockey tournament and a Wii Frisbee tournament among some of the highlights (more on those in a later post).

While my delayed flight did not land until the afternoon, I was still able to attend a number of interesting sessions. The sessions on "Acceptable Advertising - and the Language You Must Avoid" and "Spotting Elder Financial Abuse - And What You Should Do About It" were two highlights. Having attended four elder abuse sessions in the past nine months, I appreciated still learning new information in the elder abuse session. The advertising discussion was very lively, helping to show just how important of an issue advertising (and compliant advertising) is within the reverse mortgage industry. These topics both leave much to think (and write) about.

With only eight hours until the morning's sessions, it has been a great and fun-filled first day. Tomorrow, with the theme of "Improving Sales and Management," should be just as packed. With a big counseling panel and a session with a representative from the Inspector General's office, day 2 should provide more interesting information. Remember to follow @rmhero to keep up throughout the day.

RMHero and The Reverse Mortgage Minute travel to NRMLA!

@rmhero will go on the road this week, heading to the NRMLA Annual Conference in San Diego, CA tomorrow! The conference will be live tweeted on @rmhero, as well as blogged here, so check back for updates.

See you all in San Diego!

To follow @rmhero, click here.

Real Estate Bidding Wars Reappear

The Real Estate section of The New York Times this week features a great feature on the reappearance of bidding wars in New York City. While one might wonder about the connection between reverse mortgages and bidding wars, the two really are not as far apart as they may seem. One of the largest concerns faced by reverse mortgage borrowers is what will happen to their heirs when they pass away. In a better market, one could have argued that the home would sell for more than was owed in the reverse mortgage, leaving a surplus for heirs. Now, with the market so low, many are making the reverse argument- that the FHA mortgage insurance premium (MIP) protects heirs if the reverse mortgage is worth more than the home sells for.

But as the article on bidding wars points out, a home must be priced properly to lead to a bidding war. Many homes are listed at above market value, leading to increased inventory but low demand. However, if a home is priced appropriately or even a little bit below market value, it is more likely that a bidding war over the home will result--especially if it is a good piece of property. In the examples mentioned, many sellers were able to significantly increase the price they received for their homes by starting a bidding war.

As a result, when pricing homes to sell, homeowners should research the market and make sure that their homes have been priced appropriately. A correctly priced home is likely to sell faster. Clearly some markets are more likely to see bidding wars erupt than others (New York City certainly being one of them), but it's still an important phenomena for sellers to keep in mind, meaning that heirs may be able to receive more when discharging a reverse mortgage debt than they otherwise thought.

HUD Grants Cushion for New Regulatory RESPA Requirements

The US Department of Housing and Urban Development (HUD) announced today that it would instruct the Mortgagee Review Board (MRB) in enforcing the new Real Estate Settlement and Procedures Act (RESPA) requirements during the first four months of 2010. The instruction means that as long as FHA-approved lenders are acting in good faith in the spirit of the new RESPA guidelines, they will hopefully be immune from actions against them. HUD is also asking federal and relevant state agencies to give lenders the same 120-day grace period.

A lender will be considered to be in good faith based upon whether the lender is using the new RESPA guidelines and other FHA materials for guidance and whether they have invested in and committed to the training, technology, and quality assurance necessary to be in compliance.

Given the burden the new RESPA guidelines will place on lenders, it is good of HUD to allow more leniency in punishing lenders for being out of compliance-- at least in the early stages of the new regulations. Changes include the use of a new standardized Good Faith Estimate (GFE) with specific disclosures as to the key loan terms and closing costs. The changes to RESPA go into effect on January 1, 2010. They apply to reverse mortgage lenders as well as traditional mortgage lenders.

FHA Reserves Low

While the FHA is trying to avoid a government bailout, its reserves have fallen to a dangerously low level. By the end of the 2009 Fiscal Year on September 30, the FHA only had $3.6 billion in reserves, compared with $685 billion in outstanding insured loans. This brings their ratio to .53%, far below the government mandated 2%. Still, the FHA insists that only in their worst case scenario, which has housing prices in the 10 largest cities falling another 28% below their current level and the unemployment rate rising to 12.5% from the current 10.2%, would they need a taxpayer bailout.

Nonetheless, it appears that the FHA is in trouble. 17% of FHA borrowers are delinquent on their mortgages, compared with 13% on all the mortgages issued, according to the Mortgage Bankers Association (MBA). As a result, it's not surprising that the FHA is taking significant losses. Although the FHA insists that their borrowers have higher credit scores than before, the FHA is insuring nearly 25% of all mortgages and almost 50% of those to first-time homebuyers. Given how volatile the economy has been, it should come as no shock that many borrowers continue to be at risk of default and foreclosure if they lose their jobs to the poor economy. First-time homebuyers may be more likely than experienced homeowners to overestimate their financial readiness to own a home.

Some of the proposed solutions include raising the mortgage insurance premium (MIP) and increasing the down payment requirement on FHA loans to 5% from its current 3.5% level. Rep. Scott Garrett (R-NJ) was quoted by the NY Times as saying, "The administration has to stand up and say, "This is what's best for the taxpayer." It is clear that asking taxpayers to help with the bailout is a last resort, and one that is trying to be avoided.

More Buyers Taking Advantage of Federal Modification Programs

After a slow start, President Obama's Mortgage Relief plan appears to be having a larger effect. According to a government report released yesterday, one in five eligible homeowners are taking advantage of the program. More than 650,000 borrowers have signed up for five month trials under the "Making Home Affordable" Program. To complete the modifications, the borrowers must fill out a stack of paperwork and prove that they can make payments on time.

The program is having a greater effect in some parts of the country than in others. Arizona, Nevada, and California, three states hit hard in the housing crisis, have participation rates of 22, 18, and 19% of eligible homeowners, respectively. To be eligible, homeowners must be two payments behind or in foreclosure at the end of last month. In Florida however, only 12% of eligible homeowners were participating in the program.

It is good to see the improvements in the execution of the "Making Home Affordable" Program. It is a program that has the potential to help a lot of people, but was not doing so. With trial modifications offered to 29% of eligible homeowners, a significant improvement from the 15% trial modifications had been offered to at the end of July, it looks like the program is making headway. While it may not mean that the government will meet its goal of 3-4 million loan modifications within the next three years, it is a promising start. The homeowners do have to be able to make their payments however and the eligibility requirements still leave out many affected by the crisis.

Introducing "The Reverse Mortgage Minute"

Hello everyone, and welcome to "The Reverse Mortgage Minute," your new home for daily reverse mortgage, real estate, mortgage, and other interesting news.

Earlier today, Reverse Mortgage Guides made the decision to end an arm of their site, which means I'm out of a job. However, the cold feeling was soon replaced with a warm one when I realized all the possibilities this allows for me and my site.

Today I've started thinking about the future, and with that comes the launch of this blog. Having spent the better part of the last year immersing myself in the reverse mortgage industry, I find that I am still fascinated by reverse mortgages and passionate about the product. I want to continue to follow and report on the industry, and the great part is that I can do that even better now.

As a result, I am pleased to announce the beginning of "The Reverse Mortgage Minute." The Reverse Mortgage Minute will pick up where the Reverse Mortgage Guides blog left off, continuing to report on the latest industry information. However, most posts will be geared towards lenders, and I'll be able to take a little more liberty in adding new posts that I think are fun and interesting.

Meanwhile, I'll be working on figuring out my next steps, whatever they may be, in the reverse mortgage industry or beyond.

My old email has expired, so you can reach me at reva.minkoff@gmail.com or find me on Twitter, as rmhero, my new Twitter account.

Thanks to everyone at Reverse Mortgage Guides. They know this, but it's been a pleasure working with everyone, and I hope our paths will cross somewhere down the road. I'll hopefully see people at the NRMLA conference next week, and otherwise, I'll see you all on the web.

And feel free to subscribe to the site by clicking on the link to your right.

About Me

Reva Minkoff is a blogger, freelance writer, and web marketing expert, currently living in Chicago, Illinois. Born and raised in New York City, Reva attended Harvard University, where she graduated with honors in Government. While there, she was an editorial editor and Staff Director of the Harvard Crimson. She has had articles published in The New York Times, Seventeen Magazine, and on UWire, amongst others.

Reva has worked for Google and Sears Holdings, where she learned PPC and email marketing, respectively. Most recently, she was Editor-in-Chief and Senior Marketing Analyst for Reverse Mortgage Guides. While there, she honed her PPC, SEM, and SEO skills. She also blogged extensively for Reverse Mortgage News, and had guest columns on Gilbert Guide, among others.

Currently, Reva is writing for Reverse Mortgage Minute, Reverse Mortgage Daily, and Caring.com, among others, where she serves as a reverse mortgage expert. She is also doing PPC, SEM, and SEO for any site she can get her hands on. These include PublishersPortal.com, and CuttingThroughTheKnot.com.

Reva is available for writing, editing, blogging, and search marketing opportunities. To contact her, please email reva.minkoff(at)gmail.com.