Florida Reverse Mortgage

800 Million for Reverse Mortgages in Budget

2009-05-10T12:33:00-05:00

President Obama's new budget includes $800 million request for funding reverse mortgages. This is the first time that the Reverse Mortgage program has needed tax paying subsidisation. In the past the insurance premiums collected on each reverse mortgage was sufficient to cover the losses and projected losses in the program. The insurance premium is 2% of the Max Claim amount plus .5% of the accrued balance monthly. Many borrowers complain about this amount, it is one of the largest expenses in the transaction, but it is not currently enough to cover the programs losses.

A few things have changed the dynamic causing this shortfall for the first time ever: Extremely low interest rates and Dropping home values.

Low Interest Rates:

The reverse mortgage calculations are based on 10 Year Treasury (while the actual rate is based on the 1 year treasury). The idea behind this being that the 10 Year should reflect where interest rates will be over time to compensate for increases. In the last few years, interest rates were driven to such low levels that the 10 Year Treasury did not accurately reflect the rates that were most likely to occur over the life of the Reverse Mortgage. To compensate for this change in rates, FHA/HUD put a 'floor' into the HECM program by not increasing principal limit factors for any rate under 5.56%. This floor of 5.56% will help protect the long term stability of the fund by not allowing severe temporary drops in interest rates to set unrealistic principal limit models. You can see this in the HECM factor tables, as all rates below 5.56% (this highest rate that rounds down to 5.5%) are the same.

Dropping Home Prices:

When FHA/HUD designed the principal limit tables they used a long term average for property appreciation. The downside to this occurs in times like this where there is a temporary shift in property appreciation (in this case, negative appreciation). When property values drop and a HECM borrower passes away, HUD must make up the short fall. In the reverse though when a home has significant appreciation HUD does not get any of the upside, it all goes to the Homeowner's family. So in times of lowering values HUD takes all of the loss, but in times of property appreciation HUD is unable to take any of the gains. This has created a temporary situation where HUD is experiencing a higher than usual amount of claims.

Unfortunately for HECM borrowers, if this situation does not correct itself, HUD may have to revise the hecm factors using a lower amount of property appreciation. This would result in HECM borrowers receiving less of the equity from the reverse mortgage transaction.

Jacksonville Reverse Mortgages

2008-05-05T14:46:00-05:00

Our Jacksonville Florida office has been seeing more and more reverse mortgage business. It seems there are many north Florida seniors who are taking advantage of the Reverse Mortgage. Most of the loans are FHA Insured HECMS although some have utilized our Jumbo Product.

Our Jacksonville Beach office serves the North Florida market. As a local company we understand whats going on with values in Florida and that values can change greatly from neighborhood to neighborhood. This understanding of local market trends allows us to serve our local customers much better than a company located out of state. Our employees have lived in many of the neighborhoods and areas where we now make loans which gives us a much better understanding of the values.

We have recently made loans in Jacksonville, Ponte Vedra, St. Augustine, Orange Park and many other North East Florida communities.

The Jacksonville office is located at:

340 3rd Ave South, Suite A

Jacksonville Beach, Fl 32250

To get the the office travel east on Beach Boulevard to Jacksonville Beaches. Turn left on 3rd Street/A1A and travel south three blocks to 3rd Ave South.

Fixed Rate Reverse Mortgage - Florida

2008-04-17T19:21:34-05:00

We are proud to offer a Fixed Rate Reverse Mortgage! Many Seniors have been hesitant to take advantage of the benefits of a reverse mortgage because of the adjustable rate. Not any more, we are glad to announce the Fixed Rate Reverse Mortgage.

As a Special Offer, the first 100 people who apply for a Fixed Rate Reverse Mortgage will receive a 1% origination fee - a 50% Discount! The offer is only available in Florida since that is where we are license. If you are interested in a Fixed Rate Reverse Mortgage in Florida call today to take advantage of this special offer. If you are one of the first 100 people you can really save some money.

Call today for details (888) 648-4843.

FHA Principal Limit Lock

2008-04-10T17:39:00-05:00

HUD Recently released a Mortgagee Letter that effectively eliminated the Principal Limit Lock for HECM Fixed Rate Loans. The notice stated that the final note rate had to match the rate used to calculate the principal limit.

This means the amount of money available in a reverse mortgage could change from the time the application is made and the time the loan closed. This ONLY effects Fixed Rate HECM loans which are already offering less cash than the traditional HECMs.

I don't understand why lenders aren't hedging this paper and offering a true "Lock In" upfront like forward mortgages. Why rely on a principal limit lock would they could be offering a rate lock up front. I think this is a good example that the reverse mortgage industry still has some maturing to do. There was a time in Forward mortgages when rates could not be locked in advance of closing.