Wanted: Good News About Reverse Mortgages

[i]BLOG VIEW:[/i][/u] Last week, the National Foundation for Credit Counseling (NFCC) put out a press release with a rather amazing headline: ‘Reverse Mortgage Could Be The Right Answer For Cash-Strapped Senior.’ [/b]The press release gave a quickie definition of the Federal Housing Administration's (FHA) Home Equity Conversion Mortgage (HECM) while noting that NFCC has approximately 500 certified HECM counselors that can provide information and advice on this product. ‘Reverse mortgages are the perfect solution for some people, but not all,’ said Gail Cunningham, an NFCC spokesperson, in the press release. ‘At your counseling session, feel free to keep asking questions until you completely understand the reverse mortgage product. And, be sure to inquire if there might be a better option for you.’ The NFCC's endorsement, even though it was wrapped with a caveat that this is not a one-size-fits-all product, was a welcome bit of sunshine in a somewhat gloomy June landscape. This month has already seen two major slices of bad news that contribute to a growing negative resonance surrounding this product. Back on June 18, the Washington Post reported that the FHA's HECM program ran into a $798 million estimated budget shortfall during the last fiscal year. That represented its first-ever loss for this program and the blame was primarily focused on the dramatic decline in housing values during the course of the recession. In response to this financial calamity, FHA instituted a 10% cut in the maximum borrowing amounts available to seniors while asking Congress for a new $250 million subsidy. To date, Congress has not responded. As a result of this problem, the FHA is becoming much tougher on seniors with reverse mortgages who fail to pay their local property taxes or hazard-insurance premiums – those folks will now find themselves running the risk of being fast-tracked into foreclosure. Fannie Mae is also reportedly adopting a similar get-tough approach. As if that weren't bad enough, there is also the Federal Bureau of Investigation's 2009 Mortgage Fraud Report, which was released earlier this month. Reverse mortgages were cited as being a prime target for fraudsters to ply their miscreant tricks. ‘HECM-related fraud is occurring in every region of the United States, and reverse mortgage schemes have the potential to increase substantially as demand for these products rises in demographically dense senior citizen jurisdictions,’ the report stated. Even a casual hunt through the latest news headlines via Google turns up stories that add to the doom and gloom: ‘New Scam Targets Elderly Homeowners With Reverse Mortgages,’ ‘Reverse Mortgage Home Loan For Senior Citizens – Is Refinancing A Better Option?’ and ‘Dangers Of Reverse Mortgages’ were among the headlines that popped up in the early stages of a search-engine spin. Yet the industry has not been easily spooked by these screaming headlines and the angst from Washington. Earlier this month, Generation Mortgage took the sector in a bold new direction with its Generation Plus fixed-rate jumbo reverse mortgage program, which is aimed at property valued between $1 million and $6 million. American Advisors Group, another reverse mortgage lender, is aiming for a higher profile with its recent hiring of Fred Thompson, the former Tennessee senator and one-time candidate for the Republican presidential nomination, as its national spokesperson. Clearly, the sector is willing to put its money on the product's viability. Nonetheless, the challenges remain for reverse mortgages. If the product sector continues to grow, it will be a vindication of the reverse mortgage's value as an important aspect of the U.S. mortgage banking industry. While we cannot ignore the bad news that is clouding the sector's horizon, let's not forget to keep an eye out for the good news surrounding reverse mortgages. – Phil Hall, editor, [b][i]Secondary Marketing Executive[/i][/b] [i] (Please address all comments regarding this opinion column to hallp@sme-online.com.


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