Disqus - Latest Comments for The_Cynic

Re: US Mortgage sees opportunity in down HECM market

The_Cynic — Tue, 11 Sep 2018 16:38:35 -0000

This lender is correct.

This is the time to gain more market share. Right now the outlook for fiscal 2019 is not strong. Since 10/2/2017, HECM demand resembles 2004 more than it does 2009. This fiscal year will be the eighth straight year that our fiscal year endorsement totals are lower than those for fiscal 2006 when they reached 76,351. Fiscal 2006 was the fifth best year for endorsements with fiscal years 2107-2010 coming in with higher endorsement totals than fiscal 2006.

When better to gain when fiscal year 2019 is looking like a fiscal year that will have fewer total endorsements than fiscal 2018? It should be the worst year for HECM endorsements since fiscal 2005. It seems many see fiscal 2019 as a year to move up in the endorsement standings. They are probably right.

Re: The Mortgage Professor debunks HECM myths

The_Cynic — Tue, 04 Sep 2018 17:08:08 -0000

These are some unusual arguments. I prefer not to dissect them because of who Jack is and his generally unwavering support for the HECM program. Respect is earned over a lifetime not given because of being a paid appointee of a board.

Re: HECM counselors see volume pick up

The_Cynic — Mon, 03 Sep 2018 18:50:12 -0000

John,

Unfortunately, what is written about in our industry publications is not read that much outside of the mortgage industry. I doubt if you went to the nearest city near you with a population greater than one million you would find even 3% of the public who describe to you what a proprietary reverse mortgage is. The buzz is almost exclusively inside the industry.

John, it is clear you do not understand how to use the HECM line of credit as a hedge. The concept is if you have a security that drops in value, you can draw on the line of credit rather than draw that security down. Then as the security recovers, you can pay back the cash borrowed from the line of credit. You should read Barry and Stephen Sacks' article on this subject, titled, "Reversing the Conventional Wisdom."

I was not aware that there are any lines of credit on any proprietary reverse mortgage where it is NOT required that all amounts be drawn completely down in minimum equal payments fully amortizes the amount available from the line of credit at closing in a period of 60 months. (If you have another line of credit with proprietary reverse mortgages please cite its name.) Why it works that way is because there are currently no adjustable rate proprietary reverse mortgages.

I hope you are enjoying the remainder of the holiday weekend.

The_Cynic

Re: HECM for Purchase gives builders competitive edge

The_Cynic — Wed, 29 Aug 2018 15:53:17 -0000

John,

I know of one H4P originator who does more H4Ps per month than Katie but Katie is a H4P champ. There is a saying in science that the exceptions prove the rule.

It is a big mistake to consider the potential for H4P business without considering:

1) the percentage of seniors living in the locality and frequency of seniors buying FHA qualified homes in that locality,

2) the frequency of all cash deals by seniors, and

3) the type of homeowner that the homes being built in your area are being built for.

If H4P was the magic key to more endorsements as so many claim why is H4P endorsement growth so slow???

Re: Q&A: AAG CEO Reza Jahangiri on the lender’s rebrand

The_Cynic — Mon, 27 Aug 2018 16:23:13 -0000

Steven,

You might also address your idea to NRMLA (National Reverse Mortgage Lenders Association), the trade association for reverse mortgages. As you would expect Reza is a NRMLA co-chairman. A somewhat similar approach was attempted with a campaign known as the Extreme Summit. It had a lot of marketing costs and was doomed to failure as a result.

The annual NRMLA convention is scheduled for the end of October in San Diego. What great timing.

Keep appealing to Reza for the sake of the industry. With your connections and experience in doing this, what a great idea. It will need time to grow but it should start now.

Good luck.

Re: HighTechLending: It’s all about leads

The_Cynic — Mon, 27 Aug 2018 14:45:38 -0000

Jessica,

Great information and those stats are interesting. I worked expensive leads from the Senior Lending Network created by David Peskin for a few years. In those early days, you had to really work them but in my last order I had a 12% conversion rate. In today's environment, 10% is extremely good.

Let us hope HighTech hones its methodology so that volume increases even if the conversion rate stays about the same. If every Mortgagee saw their full-time originators doing 3 to 4 loans a month, the endorsement situation would fix itself as long as HUD does not require even lower PLFs.

Re: The American College champions reverse mortgages

The_Cynic — Mon, 27 Aug 2018 14:34:42 -0000

Alcynna, Great job on the first subtitle, although I have no idea what part HECMs have in any retirement income planning whatsoever. Income provides cash that has no implication of repayment. It is just the opposite with a HECM because it is not income but debt.

Although, the following is a very common statement in our industry, it is not found in the legislation: "Reverse mortgages were introduced to help older adults afford to stay in their homes as they age." The legislation does not speak about staying in home as one ages but does speak in terms of providing liquidity to seniors as they see their incomes reducing and expenses increasing. Aging in place as it is generally referred to is a byproduct of HECMs, not their purpose.

Also experts do not generally herald HECMs "as a smart financial planning tool." Although a few certainly have heralded HECMs as a useful financial retirement product, the vast majority are oblivious to its distinct features and benefits to borrowers.

The RICP is not "a program designed to explore how reverse mortgages can be used to bridge the gap in retirement income planning." In fact the program is focused on typical retirement income planning course work with a minor emphasis on reverse mortgages within that coursework. Jamie Hopkins correctly treats retirement income planning and reverse mortgages as two separate in stating the following: "The research around reverse mortgages and retirement income planning shows...." Jamie is not given to exaggeration or mixing concepts together. Perhaps a course on improving cash flow in retirement will ultimately be added to the program where reverse mortgages, true equity release products, other mortgages, downsizing, retirement income and other financial products and transactions providing cash in retirement can all be viewed in terms of cash flow to the senior.

Let us hope that no lender or originator reading Jamie's following comment views it as an excuse for not fully participating in the education of others about the need to consider reverse mortgages in retirement cash flow planning: "In order to change the fate of reserve mortgages ... the burden lays not only on the shoulders of lenders, but on the backs of researchers, academics, financial advisers and clients interested in the strategic use of assets in retirement."

Alcynna, great coverage on the good work going on at the American College.

Re: HECM for Purchase gives builders competitive edge

The_Cynic — Fri, 24 Aug 2018 03:14:10 -0000

John,

Percentages MAY result from research but percentages are just one aspect that research MAY result in. Data does not necessarily show us where to target or what should be targeted but it MAY help in that regard.

If H4P was all its adherents claimed, the logjams at HUD would mean the normal period from case number assignment to endorsement would be ten months rather than four. Originators would be hiring assistants and even originators to handle the overload. Mike Banner alone would have more H4P endorsements than all other other originators combined.

You say why do the research? My answer is that is how much of the H4P potential can be located.

I doubt ALL H4P praise. In 10 years not one year of H4P endorsements, not one has reached 3,000. Please explain why.

Re: HECM for Purchase gives builders competitive edge

The_Cynic — Wed, 22 Aug 2018 17:22:48 -0000

John,

This spiel is not new. On July 30, 2008, HERA was enacted by signature of GWB. HERA permitted H4P for most parts of the US (God bless Texas). It is over 10 years later and H4P is still less than 5% of our endorsement volume. California still leads the way in this product both in total endorsements and in the endorsements per CA resident who either has a green card or is a US citizen. Florida which has the largest percentage of seniors to its general population is horribly behind California in per capita H4P production. Yet Florida, not California has the highest concentration of seniors than any other state in the US; California is not even close.

The industry needs its own to provide the research you speak of. So what is the percentage of new homes sales to resale homes sales is occurring in the Knoxville region? What percentage of seniors are participating in each? Are the homes being built geared more the first time home buyer or the senior community? What percentage of seniors to the entire population live in the region? What percentage of the new home sales last year were completed using H4P? What about in the resale market? How many Realtors are you dealing with as to new and resale transactions? What kind of success are you having with these referral sources? Is Knoxville typical for areas like Memphis, Nashville, and Chattanooga?

There is far too much glossing over the numbers in the industry. With less than 3,000 endorsements for the last two months, it is time we get down to brass tacks. Dreaming was and should have been a practice 10 years ago. Today we need pragmatism.

You are not the problem but it is time for change. Without pragmatism, we will soon be dreaming about the days of more than 2,800 endorsements per month. Remember the days when we were reaching to get to a minimum of 10,000 HECMs per month? Now, that is nothing more than decade old memories.

Re: Tapping home equity though property tax deferrals

The_Cynic — Wed, 22 Aug 2018 16:00:35 -0000

John,

There are several differences. The first is the age for qualification. Second, it is very hard for the deferral to hit 60% of the value of the home unless 1) the home is in a low appreciation area, and 2) there is loss in home value. To be eligible for any deferral one has to determine the amount that is eligible. So there is at least a two part process in qualifying as to age and then as to the amount eligible for deferral. This is not a simple process.

Re: Tapping home equity though property tax deferrals

The_Cynic — Wed, 22 Aug 2018 15:50:53 -0000

"This is according to the Boston College Center for Retirement Research, which has long proposed home equity use – and reverse mortgages – as a means to generate retirement income."

Here we go again, reverse mortgage proceeds are claimed to be retirement income. They are not. Retirement income does not have to be repaid while reverse mortgage proceeds do not. Reverse mortgage proceeds like additional retirement income do increase cash inflow which in turn increases cash flow. Again this shows that income is NOT king in retirement but cash is. In fact, seniors do not worry about running out of income but they do worry about not having sufficient cash inflow to cover their cash outflow.

When a property tax deferral goes into effect, it does NOT create income. Instead it increases cash flow by decreasing cash outflow.

Re: HECM counselors see volume pick up

The_Cynic — Wed, 22 Aug 2018 15:11:14 -0000

John,

There is an executive view of proprietary reverse mortgages and a pragmatic one. When I read your comment, it seemed far more executive summary than pragmatic, why?

While there is a buzz among originators when it comes to jumbo products, there is little reaction from the press. So where is the buzz "around town" coming from? This seems far too optimistic for now. This product is proportionately weaker but is almost as risky to seniors as fixed rate HECM Standards once were over 5 years ago.

You state one good reason to get a jumbo reverse mortgage is to "...have a cushion set aside fund to hedge other investments...." What "other investments" are you referring to. No reverse mortgage is an investment. It is plain and simple a mortgage. While an adjustable rate reverse mortgage can be used as an effective cash flow tool, the jumbos being offered today are not. They are no different than some negatively amortizing forward mortgages.

Until we have an adjustable rate jumbo reverse mortgage with reasonable terms, the value of jumbo reverse mortgages will be less than stellar to the senior community. It is the uses you do not mention where the value is to the broader eligible senior community.

As one of the first to adopt the use of the term "downward sloping, peak to valley, secular stagnation," any jumbo closings should have some impact on that position but for now it seems minimal at best. It is one thing to dream and quite another to evaluate the actual situation. At one time in this industry dreaming and evaluating the actual situation were not nearly as divergent as they are today.

Re: Reverse mortgage originators sound off

The_Cynic — Mon, 20 Aug 2018 15:33:58 -0000

Where is the news? What does the recruiter expect when the market is less rewarding, marketing costs are rising (an election year), and margins are dropping meaning less compensation to the originator.

If we are going to dwell on a brighter future, we must divide the future into two parts, near-term and long-term. Near-term the future is not so bright. The Case Number Assignments (CNAs) for June 2018 (the base for endorsements in October 2018) were less than those for May 2018. News just in, you cannot have an endorsement until you have a CNA that has gone through underwriting and document review and other closing finalization.

The long-term future is bright or not so bright but that is a matter of emotions.

For example as the number of seniors swell, where is there any correlation with downward SLUMPING, peak to valley, secular endorsement stagnation?

As home equity of seniors is supposedly swelling, Beth tells us she is receiving fewer calls from qualified borrowers. So how is greater home equity of seniors correlated to fewer qualified borrowers?

Finally, as media report that seniors are watching their pension assets shrinking, where is the growing interest from seniors who actually need them and can qualify for them?

What seems to true is, in fact, is that there is NO correlation between all three of the prior paragraphs items and endorsement growth. Blame it on whatever you want but facts are facts. Dreams are dreams. If you do not see this, ask yourself why a consumer protection, financial assessment, has kept the industry in downward sloping, peak to valley, secular stagnation.

Re: HECM for Purchase gives builders competitive edge

The_Cynic — Mon, 20 Aug 2018 14:58:49 -0000

As new home sales deteriorate over the next few months, what is the expectation for H4P opportunities? Of course all real estate is local but overall the expectation is new home sales are going down nationally.

NAR pictures new home sales as just 10% of the entire home sales market. So how do we reach the other 90%? Year after year we hear the same old excuses for the lack of H4P sales.

Last year, there was supposed to be a huge change with the change in the date when applications can be submitted (before issuance of the certificate of occupancy). So what has that done for H4P? Endorsement counts do not reflect any significant change at all. This was supposed to be a game changer.

There is way too much time spent and dollars spent by the industry on H4P. It is a less than 5% product and continues to be so. Change comes and change goes and still no REAL progress on that less than 5%....

Re: What happens when you take a reverse mortgage, but your spouse does not?

The_Cynic — Thu, 16 Aug 2018 03:37:02 -0000

The article states: "If you have a non-borrowing spouse listed in your loan file, you may qualify for less money, as the loan amount on a reverse mortgage is determined by the youngest age of the borrower."

Yet Mortgagee Letter 2015-02 states: "When determining the Principal Limit, mortgagees may not use the age of any Ineligible Non-Borrowing Spouse. At origination, mortgagees must base the Principal Limit on the age of the youngest borrower or Eligible Non-Borrowing Spouse."

I agree with Dan. He did miss something in his summary statement of who qualifies as an eligible NBS and that is the NBS must be the spouse of the borrower from application continuously until the death of the borrowing spouse. If a married borrower and NBS divorce after the loan closes but continue living together, the NBS is ineligible to defer payment on the HECM despite meeting the residency requirement. This requirement is clearly stated in the first requirement to the eligible NBS certification which declares in part:

"I understand that my spouse's HECM contains a deferral of a due and payable status to prevent my displacement from the property following the death of the last surviving borrower under my spouse’s HECM but only if:

1. I remain(ed) the legal spouse of the HECM borrower, identified above, for the remainder of [his/her] life;"

Re: HELOC use is on the rise

The_Cynic — Thu, 02 Aug 2018 17:45:08 -0000

Yet reverse mortgage volume is in the worst retreat than in over 15 years. It was recently reported that not since January 2013 has there been HECM (FHA insured reverse mortgage) volume for two consecutive months lower than the monthly volume for June and July 2018. Yet in early June the stat expert for the industry reported that in all likelihood April 2018 was the bottom for HECM volume in 2018. The June 2018 drop was over 15% from the volume of April 2018. It seems the industry does not yet understand its current production cycle.

Re: Need cash? Take an equity partner

The_Cynic — Thu, 02 Aug 2018 17:06:33 -0000

The home equity picture of seniors seems somewhat overly optimistic based on a recent Pew Research Center report. As to home ownership, while title does not change, carving out 35% of one of the key rights in home ownership does not sound like ownership remains intact.

Re: Why reverse mortgages still matter

The_Cynic — Thu, 02 Aug 2018 16:49:31 -0000

All of the items listed above are true. However, just recently in a July 29, 2018 Reverse Mortgage Daily article, Alex Spanko reported that Pew Research Center presented recent findings on research on home equity in which PRC found that despite the Great Recession ending in 2009, the home equity of seniors has not fully recovered. This is very surprising based on recent data on senior home equity frequently cited by the reverse mortgage industry that shows incredible gains in senior home equity.

Re: Q&A: Synergy One's Torrey Larson on the Mutual of Omaha Bank deal

The_Cynic — Thu, 02 Aug 2018 16:36:34 -0000

Let us not lose sight that for three fiscal years, endorsed volume virtually collapsed followed by what will be 6 straight years of slightly downward sloping, peak to valley, secular stagnation. During those almost nine years, two major banks and an insurance company all left the industry.

It has taken almost the entire period of secular stagnation to see any major financial institution return to the industry. It is not surprising that its target was RFS. Torrey has a reputation for creating reverse mortgage companies that others see as something they can build from. RFS is no exception.

As residential real estate sales begin to achieve volume that has not been seen since the heyday of the real estate market just before the Great Recession, there is some hope that 2020 could be the year that the reverse mortgage industry starts making strides to returning to its higher volume days. How that will occur before 2020 is a mystery, even with MOOB in the industry.

BUT for now the reverse mortgage industry deserves some good news and having MOOB as part of it is a time for celebration.

Re: Reverse Mortgage Changes Bring Rate Competition, Program Stability

The_Cynic — Mon, 13 Nov 2017 02:43:00 -0000

Articles like the above are what results from too much optimism. To say I am skeptical is an understatement.

The first reaction by lenders was to fight to keep margins higher than expected. Fundamentally it would seem that competition would dictate lower margins but that in no way is a prediction.

Is the HECM program stable? We need to wait and see.

Will the program survive? Without a doubt. Will we see lower endorsements in fiscal 2018? Per John Lunde, the answer is yes.

As to predicting particular lenders or TPOs that will do well in the transition, that is far beyond my pay grade.

Re: HECM Credit Line Growth Could Slow Substantially Under New Rules

The_Cynic — Fri, 10 Nov 2017 17:00:09 -0000

This is the voice of the Shelley I know and respect.

Great post.

Keep up the good work and have a great weekend.

Re: HECM Credit Line Growth Could Slow Substantially Under New Rules

The_Cynic — Fri, 10 Nov 2017 16:53:08 -0000

Tom,

Your first question is a good one. Perhaps you should be asking REVGUYJIM since he is trying to justify what happens with a HECM to protect what it is that Shelley supposedly said that is cited above. What is interesting is that we have not heard from Shelley yet. Quite frankly, not even REVGUYJIM knows exactly what Shelley said except those directly involved in the interview. My criticism was of what the Shelley reflected in the article supposedly said.

Now as to how HECMs actually work. Currently at closing HUD charges 2% of the Maximum Claim Amount which is the lower of the appraised value of the home or the FHA HECM which is currently $636,150.

Monthly FHA charges the loan each month an amount equal to the average balance due during the month times 0.5% divided by 12. So even though it is an annual rate of 0.5%, it is charged monthly making it a compounded cost.

It is ridiculous to think that "THE key to retirement planning" is assets alone. The key to retirement planning is cash flow. You could understand assets all you want but if the cash they can generate is insufficient to pay the bills, then all of the planning was in vain. You need to attend a beginning masters degree course in personal financial planning where you will generally obtain a far more holistic approach than just being focused assets.

This is why I am not so hot on Retirement Income Planning certificate programs although I am certainly not against them. The programs have their place but are too narrowly focused unless the student is supplementing those courses with ones concentrating on other areas of financial planning or the student will only be dealing with such assets in their career.

Perhaps I am so strong about other areas of financial planning because I and most of my close friends are but months away from
turning 70.

Re: 10% of Older Homeowners Could Benefit from HECMs, Other Equity Loans

The_Cynic — Fri, 10 Nov 2017 15:48:59 -0000

Ivan H,

EricSD was giving me a hard time about being negative just because I view the next few years as still challenged by the current pattern of secular stagnation. Your numbers make mine look like I was one of the ultra optimistic sales managers in the industry.

As to endorsements for the next three months, you are definitely wrong. The case number assignments for July and August were too good for them to be as low as last year. No doubt the case number assignments in September are even better.

You forgot about H4P. While it is small there will most likely be 2,000 or more from that source. HECMs are still useful in financial planning. I have no evidence what that is of the market. On the other hand, anecdote seems to persuade that a few do well with that source and others far less. Most who do well seem to be appealing to asset management practices, but less so to CFPs, CPAs, and RIAs.

I am expecting to see endorsements between 44,000 (current pattern of secular stagnation) and 50,000 by way of estimates from John Lunde for the last seven to eight months of this fiscal and my glowing outlook for the first four to five months of this fiscal year.

Even if I am right but your local market dries up, you are the one who gets injured for overspending on marketing, not me. Be careful about over focusing on national trends. Your market could be very different.

Have a great year.

Re: How States Could Use Home Equity to Help Seniors Defer Property Taxes

The_Cynic — Fri, 10 Nov 2017 02:55:58 -0000

Laura,

It is hard to read between the lines but that is how I am picturing it.

Re: 10% of Older Homeowners Could Benefit from HECMs, Other Equity Loans

The_Cynic — Fri, 10 Nov 2017 02:52:31 -0000

Enough with the Baby Boomers coming to save the day.

It has not happened in almost a decade of Baby Boomers turning 62 (at the current rate of over 4 million a year). Fiscal 2009 was the best year for endorsements ever but the total endorsements for fiscal 2009 was less than 3% higher than fiscal 2008. Following that were three consecutive years of outrageous losses in the number of endorsements and today we sit in the quagmire of secular stagnation and somehow the growing senior population will raise all ships? It is not like the contributors do not have any knowledge of our market or the senior population.

According to the Census Bureau, there are 74.1 million Baby Boomers living in the US in 2016. That is 22.9% of the US population. See

http://www.cleveland.com/da...

Approximately 4.1 million Baby Boomers will turn 62 in the US in 2017. See

https://knoema.com/egyydzc/...

By the end of the article above, the picture becomes of a product that will principally have demand because it is the mortgage of last resort. Hardly the stuff we would have hoped to be aspiring to at the start of fiscal year 2018.

And EricSD thinks I am negative? EricSD, just read the article above.