Disqus - Latest Comments for eqqmc2

Re: FHA’s Montgomery: New HECM Appraisal Rules Less Impactful Than Other Changes

Abel Torres — Thu, 04 Oct 2018 15:12:40 -0000

Carmine,
Lets agree to disagree. In my opinion is we had at least 3 PLF reductions and the PROJECTED losses issue has not been fixed then how we will know what the ACTUAL losses be from the book of business of 2015-2017? Actuarial science can be accurate specially if the law of large numbers apply. In the HECM formula we have variables that have a cyclic behavior over a time period of 10 yrs such as real estate home prices (appreciation). However, within the probabilistic model used in the HECM there is no stochastic variable built in for the distribution of a property condition deterioration over time for cohorts of folks over 62. At inception of the program the assumption was made that seniors would mantain their properties in a similar fashion as younger homeowners and just made it a requirement at application that the borrower must maintain the property. After 15 years of the program, it is my opinion that this premise was not necesarily true and FHA is finding out that specially for those loans that were assigned to FHA and for which the Max Claim Amount was paid, that at the due and payable event the collateral does not attract the value they expected even after assuming pessimistic home appreciation rates. In my opinion reducing the initial mca is a bandaid fix which may still backfire.

Re: FHA to Require Second Reverse Mortgage Appraisals Beginning October 1

Abel Torres — Tue, 02 Oct 2018 12:12:51 -0000

Melinda,

This is way more rare today than in the past as underwriters can check pics of those comps on Zillow or Trulia and check against pics of subject property. The rare cases I see this now a days I normally go back to the AMC and request a strong reason in wrting for using 2 or 3 comps that are superior to the subject property. You may get away with one comp if appraiser is trying to bracket but using 2 comps moves that middle point and this would mean an inflated appraisal. It is best to reject such report or have the proper comps added because the underwriter will flag it. But again if you were in business in 2004-2007 the occurence of such issues was prevalent then but very rare now.

Re: FHA to Require Second Reverse Mortgage Appraisals Beginning October 1

Abel Torres — Tue, 02 Oct 2018 12:03:49 -0000

Bram,
I do agree but if FHA’s collateral risk assesment becomes part of the origination process then it mayb undermine the opinion of value of a licensed appraiser. FHA methodology is still unknown. Fannie Mae has CU which gives a collateral risk analysis scorecard based on 20k plus of appraisals a days it receives) but it is done for audit/secondary market transactions. Fannie technically does not insure the loan either.

Re: FHA’s Montgomery: New HECM Appraisal Rules Less Impactful Than Other Changes

Abel Torres — Tue, 02 Oct 2018 11:18:20 -0000

Carmine,
Apparently you did not read the quote:
It says the PLF reduction tried to help BUT DID NOT”. Why are you even rebutting what Montgomery said?. Obviously the PLF reduction failed in helping or reducing the issues that FHA faces.

If you are referring to the following statement in the ML:

“FHA will renew the requirements beyond Fiscal Year 2019 pending an evaluation of these program changes at 6 and 9 months to determine if the goals of the guidance have been met”

As a sunset provision good luck with that. The amount or impact of any tweak to a probabilistic model such as used in the Hecm cannot be accurately evaluated till years later no matter what actuarian techniques are used. Real data (cohorts of loan level life of the loans from origination to termination) must be validated againsf the models used, to determine if real losses were impacted and accuracy of models. Have you ever read the rigourous mathematical paper on which the Hecm calculations of benefits were created? I doubt very much that Hud will not renew this rule.
The losses to MMI fund are driven by the poor condition of the collateral at the due and payable event. Reducing PLF’s and appraised values will not change the root cause problem: the last survining borrowing senior at the latter years in the life of the loan tend to neglect mantaining the property because of a myriad of reasons specially health.Hence lower recapture of collateral value at sale foreclosure or otherwise.

Re: FHA’s Montgomery: New HECM Appraisal Rules Less Impactful Than Other Changes

Abel Torres — Mon, 01 Oct 2018 12:40:34 -0000

As per the commionner’s textual statement:

““I can tell you that the changes FHA made to the principal limit factors and the adjustments to the HECM insurance premium we instated in 2017 were designed to help, but did not, and were not intended to, and will not fully solve the financial volatility of the program,” Montgomery said.”
WHAT?? The PLF cuts were designed to help but DID NOT??? This is akin to a Dr prescribing a drug to help curb an illness but not working which means the medicine was not effective. Does this mean that the PLF reduction was inneffictive or was not warranted as per Mongomery’s own admission that the measures did not help? Who is running the asylum here? Is FHA going to at some point question the validity of the actuarian reports? Clearly confusion is the best term to describe what is going at HUD/FHA wrt to assesing the status/health of the HECM program. Most appraisals reports from 2009-2014 were most likely under valued as opposed to inflated. It takes 7-12 years to deterministically evaluate the performance of these Hecms at actual termination. Average lenght years in retirement is about 18 years. If the problem is that seniors tend to let the property’s condition deteriorate as they get older then this is a difficult problem to solve at origination.How about increasing the PLF but mandating that a property be brought to a C3 condition thru a mandatory repair set aside to be completed in a year? The expected economic life of the collateral should be increased by such upgrade. Even thru wear/tear on a C3 property today would probably by a C4 by the time the loan is due and payable and still demand a decent value at sale ? I dont see any other method to force a borrower to mantain the property thru the life of the loan. Just ideas

Re: FHA to Require Second Reverse Mortgage Appraisals Beginning October 1

Abel Torres — Fri, 28 Sep 2018 21:29:25 -0000

Why even require an appraisal if FHA knows how to effectively do a collateral risk assesment? Why do we need an opinion of value from a professional appraiser if somehow FHA has a methodology to determine if the value is high or low? If I was a member of the Appraisers Institute I would be up in arms about this development. Just my humble opinion.

Re: FHA in “Fix-It Mode,” Stresses Commitment to Reverse Mortgages

Abel Torres — Thu, 12 Jul 2018 10:13:42 -0000

Glad to see an FHA commisioner that appreciates the role and relationship of the secondary market to origination. Because of the nature of Ginnie Mae HMBS there has to be a critical mass of loans in the pools and a certain age distribution in order for the pools to be sustained. It seems from the article that one of the biggest concerns to the FHA reverse portfolio are assigments since at that point the Max claim amount has been paid out of the fund and no further periodic charges come in for those loans and the potential loss at the loan level is all on the MMI fund. I had pointed this out back in 2009 and 2010. Furthermore these are the most seasoned loans and due to the advanced age of the borrowers in these case, there is a higher probability the collateral has not been a well mantained as other properties for sale by non reverse borrowers and thus there may be a lack of willingness by buyers to even bid an offer that meets shortage created by the loan balance during the foreclosure sale. Now, the unintended consequence of doing haircuts to appraisals is that in fact the cross over point to assigment to HUD is accelerated, potentially increasing the rate of loans balances reaching 98% of MCA which was the very issue that Mongomery was addressing. Lowering PLF on the other hand delays the cross over point and this hurts volume and eligibility. My personal opinion is for FHA to focus on the efficiency and due dilligenge of the servicer’s loss mitigation/REO departments in making sure the required min maintenance is performed on those REO properties to get necessary value at the foreclosure sale or REO sale. Reverse REO properties are more likely to lack any upgrades than their counter part forward REO properties which would require less maintenance during the holding period thaf they are on the market.

Re: Dispelling Current Industry ‘Myths’ About the Mutual Mortgage Insurance Fund

Abel Torres — Wed, 23 May 2018 09:52:31 -0000

This is all based on projected or estimated values over time and we know whats going on with interest rates this first half of the year so any NPV calculation in Sep 2018 will be impacted. . What about using actual data from actual loses, actual
in and out from origination to termination only?. Say Take a given fiscal year that just finished. As an example Get all loans cohort that were endorsed in 2009: trace each loan through the years that terminated this fiscal year so that you can compute the actual inflows and outflows contribution of the loan into/out of the MMI fund till its termination. Do this for all loans in this cohort that terminated this fiscal year . Also note the loans that remain active such as the one in assigments etc which had a huge outflow due the mca assigment payment and on those, a projection could be done as well as on the ones still active to its estimated termination time but that should be a separate chart. So you can have a chart with loans that went thru its complete lifecycle (this would be a great reference as there is no assumptions just plain bottom line numbers) for cohort per endirsement year and the actual contribution to the fiscal year being at termination and a chart that has active hecms with the true inflow/outflow portion plus a projected future inflow/outflow based on current conditions. I dont know if HUD provides that kind of data.I still think as per the original algorithm embedded in the Hecm program where they just teak some of the constants during the years Hud made changes. Mr Veale do you have that data? Doing such analysis would not be so hard. I dont have such data.

Re: Maine Law Would Use Reverse Mortgage as Anti-Foreclosure Option

Abel Torres — Mon, 02 Apr 2018 16:12:03 -0000

Excellent point!!

Re: HUD to Sell Due and Payable Reverse Mortgage Loan Pools

Abel Torres — Wed, 14 Mar 2018 11:33:02 -0000

Hi George,

Hud is selling non performing notes (where a due and payable clause can be triggered) instead of selling actual REO properties where the property has been foreclosed and title has transferred to the servicer. Buyers of HuD notes are different than just REO buyers since HUD note buyers are held to servicing requirements. I guess HUD either underestimated the number of assigments and thus the cost of liquidating such due and payable notes that were assigned to HUD or simply the department doesnt want to involved with the lengthy process of clearing title and executing foreclosures on these properties.

Re: HUD to Raise Premiums, Tighten Limits on Reverse Mortgages

Abel Torres — Wed, 06 Sep 2017 11:33:46 -0000

Cynic
Read the Ginniemae HMBS manual.
That will teach you the elements of securitization and perhaps the jargon (there is a double element of securitization with the Hecm market).Sorry but I have no time to teach. I have to originate lol!!

Re: HUD to Raise Premiums, Tighten Limits on Reverse Mortgages

Abel Torres — Fri, 01 Sep 2017 00:28:58 -0000

Cynic:

In the secondary market the term coupon yields refers to the interest that the hmbs pay to investors. Look at the Ginniemae hmbs guidelines for further clarification.Here is the definition:

A bond's coupon rate is the actual amount of interest income earned on the bond each year based on its face value. A bond's yield to maturity (YTM) is the estimated rate of return based on the assumption it is held until maturity date and not called. Yield to maturity includes the coupon rate within its calculation.

You can look look it here:

http://www.investopedia.com...

I know too much secondary market jargon for this forum lol!!

Re: HUD to Raise Premiums, Tighten Limits on Reverse Mortgages

Abel Torres — Thu, 31 Aug 2017 15:09:08 -0000

Let me explain:
Where are you getting data indicating that most of new HECMs have low UMIP premiums? Data please
We do know 90% of originations are hecm adjustable but we dont know the ratio of high to low UMIP of those.
Tax and HoI technical defaults can have disastrous consequences for the MMI fund because tax liens by county/city municipalities are superior liens and can be enforced thru tax sales without regards for the balance that may be owed to the mortgagee. For example say a borrower fails behind say $20k in back property taxes and the reverse mortgage balance is $200k, the tax authority can foreclose the property for $20k and satisfy the tax liability of $20k leaving the mortgagee and possibly HUD out to absorb the $200k loss. On the other hand on the scenario you describe in which the todays collateral value does not exceed the outstanding loan balance, the mortgagee will excercise the foreclosure sale and attempt yo get as high a sale value as possible (say $150k as an example) so the loss to HUD will be $50k instead of $200k. It is the superior lien status of property tax liens that overrides the seniority lender liens by recording date order that can contribute to such huge losses on enforced tax sales. This is why FHA put such enphasis on tax defaults because the agency views foreclosing on seniors as a terrible PR outcome and will prevent servicers on most cases to proceed with such sales but the federal gov doesnt have the legal authority to stop property tax sales defaults by municipalities. At the end a tax default is by statue supposed to be an accelaration clause just like any other triggering event that makes a loan due and payable. So the link to FA is there relating to minimizing the potential losses to the program.
On the upside question: looking at a snapshot in 2010-2013, many homes had lost significant value but they have rebounded quite a bit last two years. Dont you think that the losses due to termniation of upside down loans have at least been tamed? It is the sales value at termination vs loan balance that determine the size of losses (plus expenses). There is also the real estate trend in certain areaswhere home values are between $625k-$1+M today and even those fixed rates were originated with 62-90% PLF based on $625k max so plenty of room for interest to accumulate and still not have a loss.
As for 3% home appreciation you cite, what sources are you citing and whats the time cycle for averaging? At longer cycles like 10-20yr the historical value is 4% not 3%. Now a good question would be: if you want to use 5-10 yr cycles for home appreciation then the expected rate should be more representative of the horizon so a 5 yr libor swap or other shorter term index should be used to match the lower loan life expectation.

Re: HUD to Raise Premiums, Tighten Limits on Reverse Mortgages

Abel Torres — Wed, 30 Aug 2017 15:27:12 -0000

Yes but lowering coupon yields on Hecm HMBS may force investors to put their money into higher yielding investments causing chaos in the secondary market for these securities.

Re: HUD to Raise Premiums, Tighten Limits on Reverse Mortgages

Abel Torres — Wed, 30 Aug 2017 11:11:03 -0000

Thank you Mr Veale:

I think the scenario that you propose drove Hud to lower periodic MIP is intriguing. I would like to know whats the percentage of loans originated at low UMIP vs the high UMIP which will tell us the universe of loans that could potentially be such scenario: loan with low UMIP and then with no tail hecm distributions till just before termination and with a full draw just before termination. This statistical event is a multiplication of 3 probability of events (assuming indepence which is not necesarily true) ie: low UMIP, little or no use of LoC and large draw just before termination. I would love to see the data but we know that tail Hecm distributions are growing quite a bit based on hecm mbs market so I assume that the rate of LOC utilization is not small on average. Hud receives the periodic MIP from the servicers during the life of the loan if I am not mistaken so as a matematician I say the probability of this scenario should be low. The data has the final word but I say not enough time has passed since 2013 to know statiscally how many loans would be in this category because the average span of a hecm was 7 years to termination (whether a refi etc). Lowering periodic MIP cannot help the inflows to the MMI fund in any instance. On a separate topic My take is that the decision is more political (lower total rate of interest plus periodic mip rate) to softnen the blow of removing the low UMIP. There is a change in paradigm at HUD and this change is telling us that Hud believes FA is either not working enough or was a failure for FHA attempt to "fix" the Hecm program. Two years is not enough time in my opinion to know if FA has achieved its goals statististically. Plus with the last two-thre years increase in home appreciation I would think that the blow to the MMI fund should have been softened for Hecms originated in 2008-2010 and terminating now (may still losses but not as dired as predicted in the actuarian reports). In my opinion I have always contended that the original probabilitic model accounted for the long term behavior of home appreciation cycles and Hud simply went with short term fixes that never allowed the model to work over the long time with the full ups and downs of the home appreciation behavior.

Re: HUD to Raise Premiums, Tighten Limits on Reverse Mortgages

Abel Torres — Tue, 29 Aug 2017 18:00:18 -0000

What baffles me is that FHA removed the low cost MIP option (yes higher inflows for the MMI fund and based on appraised value of collateral at origination) while lowering the residual inflows of periodic MIP premiums (based on loan unpaid principal balance). So there is plus - minus changes to inflows of the MMI relationship there. Why lower the periodic premiums if the HECM program risk to the MMI fund is increasing? If we had another down turn in home values there would be a drop on UMIP received while the future residual MIP would have been 100 basis points less than todays hecms periodic mip premium. Just doesnt seem to me FHA is preparing for another down cycle on home values on the hecm side.Just shaking my head.Will the secondary market react by lowering margins to accomodate higher PL needed to fulfill Gimaes pools (at 50% of endosements from the high end years and with lower PLF it just seems that somehow more loans will be needed to keep the secutarizatiom market going).On the other hand lower margins means lower yields to Hecm MBS investors who will put their money into other higher yield investments. Oh boy!!

Re: Trump’s Proposed Budget Would Lift Reverse Mortgage Cap

Abel Torres — Fri, 26 May 2017 16:11:09 -0000

Still in the business just watching the up and downs of our industry (more downs than up) but still hanging in there.

Re: Trump’s Proposed Budget Would Lift Reverse Mortgage Cap

Abel Torres — Thu, 25 May 2017 09:49:46 -0000

Hey Cynic,

Long time no see!!
Was it a fiscal yearly cap or cap on all of the agregate of all insured loans under the HECM program that is supposed to be removed ?
Good news anyways!!

Cheers my friend

Re: Court Rules Against HUD in Reverse Mortgage Non-Borrowing Spouse Suit

Abel Torres — Wed, 02 Oct 2013 10:46:11 -0000

Thank you !!!

Re: Court Rules Against HUD in Reverse Mortgage Non-Borrowing Spouse Suit

Abel Torres — Wed, 02 Oct 2013 10:20:27 -0000

Is there a docket number for this decision?
What court issued the decision?

Re: Investors Likely Still Hungry For Reverse Mortgages Despite Program Changes

Abel Torres — Wed, 13 Feb 2013 12:54:13 -0000

Totally agreed: securitizing fixed rate lump sum hecms is more attractive than their open ended adj rate counterpart. Only drawback of the fixed rate saver is the prepayment risk due to hecm fixed rate saver to hecm adj std refinances. Will be interesting to know how the market prices the saver in the next few months.

Re: First Century Bank Rolls Out Reverse Mortgage Advisor Program

Abel Torres — Thu, 24 May 2012 09:23:13 -0000

Just a question:
How is the hecm advisor program compliant with RESPA?
Is FCB utilizing the HUD principal- agent relationship in originating a reverse and spliting orig fee etc with the advisor institution? If so then it is not a true advisor program and only institution approved by HUD as lenders could participate.

Re: Will FHA Make Way for More Private Reverse Mortgages?

Abel Torres — Wed, 23 May 2012 12:21:08 -0000

Excellent point critic!!
There are currently some niche markets that hud's hecm
dont cover such as coops, not approved condos ect where private label reverse mortgage products could play a significant role even at reduced LTV's yet there is no player stepping forward. So it is not all about competitive advantage of the HECM product but also the lack of will for lenders and investors to absorb some of the interest risk without the safety of government insurance.For example why not setup a securitization model a la ginnie mae HMBS which do use the "actuarial method" for the distribution of maturity dates in loans participating in a pool?

Re: NCOA to Congress: Take Note of a New Trend in Reverse Mortgage Borrowers

Abel Torres — Fri, 18 May 2012 15:34:30 -0000

Excellent points!!
RMs have finally become financial tools applicable to both
long and short term solutions. It is just reality and as indicated a consequence of many factors. Question for congress: what would the landscape look like without the product? I dont think many politicians would like the answer! What alternative solutions are there for folks entering retirement with higher debt burden than prevoius generations, with huge uncertainties regarding the durability of social security benefits, with retirement plans that have not recovered and who iether want to stay in their home or cant even downsize because of home values crisis?

Re: Reverse Mortgages Minus Big Banks, Where are We Now?

Abel Torres — Wed, 18 Apr 2012 01:58:30 -0000

Mr. Veale,

I guess it is pointless to keep talking to you about things that may be a little hard for you to understand. I have moved on quite a long time ago and I am looking at the future so I am rather flying on hypersonic mode that in an automobile. The only point is that, for us to understand the future, one must understand how we got here and the main drivers pushing the industry. There are factors that are driving the numbers in todays origination, an saying that there no relationships between them or ignoring their interaction is simply bad practice. Looking and working directly in the origination of HECMs, is different than just being on different blogs and providing opinions. Your initial questioning the author of post was about whether their assumptions and conclusions were valid. All that I have said is that what we see today was pretty much evident back a couple of years ago in terms of endorsements and one of the questions is whether acceptance of the product has diminished and the reasons why. I guess you never saw it coming and still having trouble with the numbers as they are today. With the current economic cycle and high volatility in certain markets it will take a some time for endorsements to come back up, even though an extraordinary number of seniors are becoming eligible HECM borrowers, there is simple not enough collateral and too high debt burden and not enough LTV in the product to regain the speed required to get us back to the 90k endorsement per year level, and this without taking into account the exit of the big threes which of course affects the widespread and sales footprint of the product. Things like HECM acceptance among seniors are second order effects compared to the other factors. Most borrowers utilize the product still as safe haven when other options are not there, There is a rate of HECM assigned case numbers that never become endorsements and perhaps this will be a good metric to follow in trying to determine if the numbers are down because of the economic factors or just because there is a drop in demand or in accpetance. To make it easier for you to understand: you can look at the rate of new HECM case assigned, look at the rates of endorsements and also look at the rate of cases that are droping off. The spread and slope or derivative of the different parameters will give you a little bit of pulse here.Hopefully as it has been indicated .more theoretical studies regarding the benefits in terms of cash flows with the product will help with market penetration and product acceptance

.I got loans to orignate and close so I wll stop at this point.