Customers of IndyMac’s reverse-mortgage subsidiary will continue to have access to their funds. Reverse mortgages provide elderly homeowners with either regular payments or a line of credit secured by their homes
This excerpt appeared in the LA Times. However, it does not make clear whether the article is referring to the government insured (which is absolutely protected) or the proprieatary program (Cash Account), which is not. This question must be clarified at once. Seniors need immediate answers. The industry needs immediate answers.
Clearly the collapse of IndyMac raises many questions for those that deal with its subsidiary Financial Freedom.
Will it be business as usual for Financial Freedom for loans in the pipeline?
Will borrowers be able to access money from their Cash Account programs? (The answer appears to be yes)
Will new Cash Account borrowers need to take all the money in one lump sum to protect themselves? (My clients, despite the assurances from the FDIC, still are fearful).
When will Financial Freedom be sold?
Will it take longer to sell Financial Freedom now that the government is involved?
What does this mean for other lenders that have their own proprietary programs?
Is this the beginning of the demise of such programs?
Since these loans are not guaranteed (or at least not as safe as the HECM) will the market demand lower interest rates (an anathema to Wall Street) or require an insurance premium protecting the borrower, which makes these loans more expensive?
I think one thing is clear: FHA (HECM)loans are safe and secure. No problems there. Very few of us in this business would have ever surmised that we would have to address the issue of just how safe proprietary programs are.
If I were to answer this question, I would reply they are relatively safe. The problem again is not with the program. Rather it is with the hubris some bankers evince. Then again maybe these programs need government oversight. The last thing that can be allowed to happen is that our elders get hurt.
What do you think?
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