When banks compete, government loans lag

As I have often chronicled on this site, the Big Boys of Mortgage Banking, (Wells Fargo, Bank of America, Countrywide, etc.) are just warming up with their push to grow and win over the reverse mortgage market.  The most intriguing trait of these big banks is their innate ability to cut out the costs that are found in government backed HEMC loans and create their own proprietary products that are much more consumer friendly.   Whether you are for or against reverse mortgages, it is clear to see that banking competition is helping to drive down fat broker fees that have been a large part of critics’ argument against them.   The Real Estate Journal had this to say in a recent article.

For instance, Bank of America, which recently acquired the reverse-mortgage business of Seattle Mortgage Company, said it will soon launch nationwide a reverse-mortgage product it’s offered to customers in Arizona since November. The product, called Senior Equity Maximizer, offers loans on up to $10 million of home equity, said Colin McCormick, reverse-mortgage product executive at Bank of America.

Bank of America’s product allows you to set aside a portion of your home’s equity to be preserved for your heirs, and the fees charged are a lower percentage of the home’s value than those charged on traditional reverse-mortgage loans. But the interest rate on the bank’s new product is generally higher, McCormick said.

Today about 90% of reverse mortgages are the traditional government-backed product, the most prevalent of which is the Federal Housing Administration’s home equity conversion mortgage, according to the National Reverse Mortgage Lenders Association, a trade group.

Borrowers have taken out about 71,500 new FHA-based reverse mortgages so far this fiscal year (which began Oct. 1), a 49% jump from about 48,000 loans in the same period a year earlier. From 1990 through to the present, about 310,000 such loans have been taken out, according to the NRMLA. Full Story 

Written by charles dennis on June 27th, 2007 with no comments.
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Reverse Mortgage for Veterans in for long battle

This story was first posted at  Army Times.

The proposal — currently pending before the House Veterans’ Affairs Committee — would allow the Veterans Affairs Department to provide a home equity conversion mortgage, or HECM, to U.S. veterans. Under the plans, sponsored by Rep. Michael Michaud (D-Maine), veterans age 62 and older could receive monthly payments from the VA that would be based on how much equity they have in their home and how long they would like to receive monthly payments. The payments would have to be repaid, with a fee, when the home is sold either by the veteran or by survivors.

Opponents say the bill does not provide anything that the existing Federal Housing Administration loan program doesn’t. Keith Pedigo, the VA’s loan guaranty service director, said the FHA program may be better, he said, because it fully insures lenders against “all losses,” while the VA only guarantees a percentage of a mortgage, generally one-quarter of the full amount. Full Story

Written by charles dennis on June 27th, 2007 with no comments.
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PBS Reports on Reverse Mortgages

When I think of PBS I usually think of Big Bird, Charlie Rose, documentaries and not so funny British comedy. In this clip a local PBS affiliate chronicles the phenomenon that has grown into the modern reverse mortgage industry.

Written by charles dennis on June 27th, 2007 with no comments.
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