REVERSE MORTGAGE INFORMATION: Tools, News and Resources to Help Seniors Decide

As the reverse mortgage industry expands and constantly introduces new (and confusing) products, some people are beginning to wonder whether reverse mortgages are destined to become the .

The same type of financial engineering and securitization that repackaged regular mortgages (once held by local banks) into exotic investment securities sold around the world is now fueling reverse mortgage growth. The financial alchemy worked extremely well with traditional mortgages. Investors exhibited an almost unquenchable thirst for these “safe” mortgage-backed securities (MBS). Yet it’s now clear that credit agencies, regulators and investors themselves did not always understand the investments or the underlying risks. (more…)

In a prior post we examined evolution of the HECM market over the past two years (ended 10/31/06 and 10/31/07) focusing on the geographic location of HUD home equity conversion mortgage endorsements. The table below examines the evolution of lenders’ HECM market shares and growth over the same time frame.

Some observations:

(more…)

Wells Fargo and Financial Freedom have long been the “titans” of the reverse mortgage industry.

Financial Freedom is said be the largest reverse mortgage lender.

A recent stated that Financial Freedom closed “close to 49,000″ reverse mortgages in 2006 (including both FHA loans and Financial Freedom’s proprietary loans) and claims to have roughly 50% of the reverse mortgage market share.

Wells Fargo, on the other hand, has long been the number one lender when looking strictly at FHA home equity conversion mortgages (HECM). HECMs are the most popular type of reverse mortgage and, generally, the product used by owners of homes valued under $400,000.

However recent data show (more…)

that Genworth, the Fortune 500 insurance company, is acquiring Liberty Reverse Mortgage, Inc. is further sign that the “big” players in the financial services sector are making serious moves into reverse mortgages. But this transaction is unique in one respect: Genworth is primarily an insurance company, not a bank.

Why is this important? (more…)

Now that the HUD HECM activity reports for June have been released, we thought it would be interesting to do a mid-year review of HECM lenders and lending activity. As we reported in our previous post, HECM growth through the first six months of 2007 has remained strong – 56,436 HECMs were endorsed compared to 40,910 for the January thru June period of 2006 – a a 38% increase.

Growth appears to be fueled largely by new entrants into the reverse mortgage arena. Lenders like , , 1ST AAA Reverse Mortgage, and who had only limited or no HECM activity a year ago suddenly are major players. To some extent, growth is occurring at the expense of established lenders. Wells Fargo, longtime leader in HECMs, saw its share of the total HECM market drop to 20% from 30% a year ago and 36% in the first half of 2005.

Interestingly, not only did Wells’ percentage share of the HECM market decline, it’s absolute number of HECM reverse mortgages also was down 6% (from 12,278 to 11,513). In addition to Wells, a handful of other Top 25 lenders also saw absolute declines in HECM loan activity: BNY Mortgage, Pacific Reverse Mortgage, Griffin financial and Circle Mortgage.

Following is our tabulation of the Top HECM Lenders through the first half of 2007 based on HUD’s monthly HECM activity reports. As a group, the “Top 25″ accounted for 31,331 HECM loans, or 55.5% of the total 56,436 HECMs endorsed during this period.

Since Reverse Mortgage Information started, we have maintained state-by-state directories for both reverse mortgage lenders and reverse mortgage counselors. The directories have been kept on static web pages meaning that anytime a lender or counselor wished to be added or wished to change their listing, they would have to go through the cumbersome process of sending us an e-mail and wait for staff to manually make the change. Also, it with this format it was not possible for users to search listings by company name, location, etc.

We recently moved the directory listings to a new searchable platform that allows users to add or modify their own content. In addition, the new platform makes available a wide range of new features to enhance listings:

At this point, we have moved the information from the old directories to the new platform. If you wish to enhance or modify your listing, you will need to determine which type of listing best meets your needs and complete a simple registration to receive a login password.

We hope this new directory platform better serves our visitors as well as the listed organizations. Here’s a general sample of what a directory listing might look like:

Credit unions and reverse mortgages would seem to be a good match. Reverse mortgages, after all, are very useful retirement tools in the right situations, but suffer from a bit of an image problem. Credit unions, on the other hand, are non-profit cooperatives with a “friends helping friends” mantra.

It would seem that credit unions could leverage the goodwill they enjoy among members to bolster the credibility of reverse mortgages and, at the same time, offer a valuable service to their retired members.

Yet only a handful of credit unions (mostly in the mountain states) appear to be active in the reverse mortgage arena. One executive at a CU who does reverse mortgages estimated that, nationally, less than 100 credit unions (out of 8,600) are actively involved in reverse mortgages. We decided to search our database of HECM loans (covering the period 9/01 through 04/07) for lenders with “Credit Union” in their name and came up with the following list:

These 630 loans account for only about one-quarter of 1% of the total 250,303 HECMs originated over this period. (The number may actually be lower since we could not verify that one institution listed – CREDIT UNION MORTGAGE COMPANY – was, in fact, a credit union.)

So why isn’t there a bigger credit union presence in the reverse mortgage market? Here’s some thoughts:

• Complexity – many CU’s are small with limited staffing and not able or willing to develop the specialized expertise needed to handle reverse mortgages.
• Skepticism – its likely some credit union administrators share the skepticism about reverse mortgages that many consumers have. More education and information about reverse mortgages is likely needed.
• Required FHA licensing – again, maybe beyond the capabilities of smaller CU’s.
• Limited Value Added – It seems most credit unions that are involved with reverse mortgages serve as correspondents for established reverse mortgage lenders (Financial Freedom, etc.). We are not aware of any CU underwriting reverse mortgages. Some credit unions may feel that their involvement wouldn’t add sufficient value for their members since the same products are available elsewhere and their ability to offer members “a better deal” than the banks is limited.
• Limited Demand – reverse mortgages are a fast-growing but still niche market. People looking for a reverse mortgage are subject to considerable direct advertising and may not even stop to think of their credit union as a possible lending source. Perhaps when more members start asking their credit unions for this service, credit unions will respond.

Whatever the reasons for the current low level of reverse mortgage activity at credit unions, we suspect that this will change as reverse mortgage popularity continues to grow. A bigger credit union presence in the market would no doubt be beneficial for borrowers by spurring competition and bringing down costs.

In the meantime, if you’re considering a reverse mortgage, why not give your credit union a call? It’s likely they’ll tell you that they don’t do reverse mortgages, but hearing directly from members is probably the best way to spur CU administrators to consider the possibilities.