If one were to look at the history of the industry, one would discover that an incredible amount of hard work laid the foundation for the reverse mortgage concept. This work began in earnest in the mid 70s. People like Ken Scholen shared their prescient views that such a program would provide additional financial succor to older American home owners. And how right he was.
As we fast forward to the present, we see that reverse mortgage closing (HUD endorsement) numbers are climbing from year to year. The empirical data illustrates the following: In the industry’s first 10 years, a total of 36,000 loans were closed. The second 10 years saw over 422,000 (counting completed fiscal years only) units close. 94% of all reverse mortgage loans have closed since 2000. In the last 2 years alone, close to 50% of these loans have closed since its inception. Market penetration is still less than 1%.
With the economy in turmoil, older Americans need assistance today. They can’t sell their homes; they typically can’t get conventional financing. Their children are struggling. Their assistance has become marginalized. Although home values have declined, still in many areas of the country, our clients’ homes still have values above the maximum claim amount.
So why are there not lines around reverse mortgage offices? Why are the phones not ringing off the hook?
I think there are a bunch of answers: The industry is turning inward. The big picture focus appears to have been lost.
The Main Player is consumed with other issues: It has been suggested that FNMA has concerns about its operating capital limits, now that it is in receivership. I don’t think FNMA is enamored with anything that will cause volume to increase. This includes the HECM for purchase program, the co-op program or the possible increase in the lending limit as spelled out in the House of Representatives’ version of the economic recovery package. Suddenly the burden of being the major source of reverse mortgage funding is taking its toll. Adversity brings the seeds of a solution.
With the specter of the implacable foe of declining home values continuing, warehouse lines are harder to come by. These lenders have also become much more conservative. Therefore, the volume of monthly closed loans will suffer. Adversity brings the seeds of a solution.
Now that HECM loans are no longer under the radar, they are being scrutinized as never before. Underwriting is becoming more tedious. Live pricing has caused the eye to be taken off the ball. The focus for many becomes what do I need to do to make the most on this loan? Was this not the kind of thinking that got those forward mortgage folks in trouble? Adversity brings the seeds of a solution
It is kind of amazing, but those misconceptions keep hanging around. Lately I have been hearing things I never thought I would hear. I am noticing a souring attitude on behalf of older Americans. I have been hearing from clients that they do not trust banks and many are having second thoughts even about the government. I’m also hearing too many seniors say that they did not like the loan officer they were talking to. I think it is possible, that there is this feeling that reverse mortgage people cannot be trusted. And fear causes paralysis. Adversity brings the seeds of a solution.
The last stanza of a poem in Napoleon Hill’s Think & Grow Rich is appropriate for those that believe adversity brings the seeds of a solution.
Life battles don’t always go
To the stronger or faster man
But soon or late the one who wins
Is the one who thinks he can
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