SEPTEMBER 2009 O
NORTH CAROLINA MORTGAGE PROFESSIONAL MAGAZINE
O www.NationalMortgageProfessional.com
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What are the prospects and some stories to select just one, so here’s a tidchallenges for the reverse mortgage bit from the political realm. At the HUD industry, and why? press conference announcing the origiThe credit implosion is the most serious nal launch of the HECM demonstration, immediate problem, and there’s no way of one of the program’s Congressional knowing how long its effects will be felt. But, sponsors was asked what would hapuntil credit conditions improve, it will be dif- pen at the end of a HECM’s loan term: ficult to create the much lower-cost products Would the borrower be forced to sell that have the most potential for meeting a the home to repay the loan, or would broader array of needs and expanding the the lender take on the risk of extending market. Other important goals include erad- the term? Apparently unaware that icating the predators HECMs would have who have harmed an open-ended “A strong HECM counseling pro- term and the prime the market’s public image and fully fund- gram can be a major factor in pro- purpose of the proing the counselors tecting consumers and the indus- gram was to insure whose work is so vital try. But all the efforts to strength- against the related to safeguarding conrisk, he answered en the program will mean little sumers and the unless an independent source of that it was a very industry. reliable and adequate funding can good question and The HECM prohe would ask his be created to support it.” gram has some staff to look into it! —Ken Scholen long-festering problems that need to be *According to resolved. The structure of Ginnie Mae’s HUD data, outstanding value of HECM securitization program and the re-emer- loans stand at $55.42 billion. Since gence of other secondary sales venues will 1989, 544,300 HECMs have been origiincrease the likelihood of borrowers los- nated, and 431,025 HECMs were outing their homes via HECM-related proper- standing. Numbers are as of June ty tax delinquencies. How many news sto- 2009. ries about such cases would it take for the public to begin associating reverse mort- Author and columnist, Atare E. Agbamu, gages with “losing your home?” On anoth- CRMS is director of reverse mortgages at er front, will more stories about negative Minneapolis-based AdvisorNet Mortgage creditline growth generate a class action LLC. A member of the BusinessWeek before this long-term problem is finally Market Advisory Board, Agbamu is resolved? And thanks to you, Atare, the author of Think Reverse! and more than problems created by the “clarification” of 100 articles on reverse mortgages. the non-recourse limit have become more Through his advisory firm, ThinkReverse widely recognized. LLC, Agbamu advises financial profesWe also need to learn why borrowers sionals, institutions and regulators have been voluntarily ending their across the country. In a 2007 national HECM loans so much sooner than any- report on reverse mortgages, the AARP one had expected and to seriously con- cited Agbamu’s work. He can be reached sider adjusting reverse mortgage bene- by phone at (612) 436-3711 or (612) 203fit structures and risk premiums accord- 9434, and e-mail at aagbamu@advisoringly. Skewing any such changes toward net.com or atare@thinkreverse.com. lower loan costs would be one way to address the cost barrier. Visit author Atare E. Agbamu’s blog at What is your favorite reverse morthttp://thinkreverse.com for gage story? his thoughts and insights on There are too many unique borrower the reverse mortgage marketplace.
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New FHA-Making Home Affordable loan mod guidelines announced U.S. Department of Housing and Urban Development Secretary Shaun Donovan has announced that the Federal Housing Administration (FHA) has implemented changes to its loan modification program to ensure consistency with the Obama Administration’s Home Affordable Modification Program. Beginning Aug.15, FHA borrowers are able to significantly reduce their monthly mortgage payments by seeking a loan modification through their current mortgage company or loan servicer under the new FHA-Home Affordable Modification Program (FHAHAMP). The Helping Families Save Their Homes Act of 2009, signed into law on May 20, allows the FHA to give qualified FHA-insured borrowers the opportunity to reduce their monthly mortgage payment by modifying the mortgage through FHAHAMP. The FHA expected all servicers to implement the changes by Aug.15. The program permanently reduces a family’s monthly mortgage payment through the use of a partial claim, which defers the repayment of mortgage principal through an interest-free subordinate mortgage that is not due until the first mortgage is paid off. FHA has used the partial claim option in the past, which allows a lender to advance funds on behalf of a borrower, to reinstate a delinquent loan that was up to 12 months delinquent. Now, this program will allow HUD to bring the borrower’s payment down to an affordable level. This will be accomplished by bringing the mortgage current, buying down the loan by up to 30 percent of the unpaid principal balance and deferring these amounts in a partial claim. FHA will pay an incentive to loan servicers for each FHA loan modified under this program. Mortgagee Letter 2009-23, along with detailed requirements for the FHAHome Affordable Modification Program, was distributed to all FHA lenders as well. The implementation of this program will further the Obama Administration’s efforts to stabilize the housing market by helping homeowners stay current on their mortgages and stay in their homes, therefore preventing the impact of foreclosures on families and communities. For more information, visit www.fha.gov.
Federal Reserve Board approves TALF extension The Federal Reserve Board and the Treasury Department have announced the approval of an extension to the Term Asset-Backed Securities Loan Facility (TALF) and that, at this time, they do not anticipate any further additions to the types of collateral that are eligible for the facility. Conditions in financial markets have improved considerably in recent months. Nonetheless, as deemed by the Fed and Treasury Department, the markets for asset-backed securities (ABS) backed by consumer and business loans and for commercial mortgagebacked securities (CMBS) are still impaired and seem likely to remain so for some time. To promote the flow of credit to businesses and households and to facilitate the financing of commercial properties, the Federal Reserve and Treasury approved extending TALF loans against newly issued ABS and legacy CMBS through March 31, 2010. Because new CMBS deals can take a significant amount of time to arrange, the Federal Reserve and Treasury approved TALF lending against newly issued CMBS through June 30, 2010. The Board will continue to monitor financial conditions and will consider whether unusual and exigent circumstances warrant a further extension of the TALF to help promote financial stability and economic growth in the future. The Federal Reserve and Treasury had previously authorized TALF loans through Dec. 31, 2009. After having conducted a thorough analysis of a number of potential candidates, the Federal Reserve and Treasury announced that they are holding in abeyance any further expansion in the types of collateral eligible for the TALF. The securities already eligible for collateralizing TALF loans include the major types of newly issued, triple-A-rated ABS backed by loans to consumers and businesses, and newly-issued and legacy triple-A-rated CMBS. The Federal Reserve and Treasury are prepared to reconsider their decision if financial or economic developments indicate that providing TALF financing for investors’ acquisitions of additional types of securities is warranted. For more information, visit www.federalreserve.gov.
CMAC details the five most common mortgage violations Approximately 98 percent of all mortgages are potentially eligible to be renegotiated due to Truth-inLending Act (TILA) violations, according continued on page 13