Do You Speak My Language?

By Shannon Hicks

VOCÊ FALA? DO YOU SPEAK PORTUGUESE? SEEMS
like an odd question for most english-speaking reverse mortgage professionals but reverse mortgages have a broad cross-cultural and international reach. While HECM counseling is the gate prospective borrowers must pass through to qualify for a reverse mortgage, language barriers can close that opportunity for many.

DebtHelper is helping break down these barriers, offering reverse mortgage counseling in Spanish, Portuguese, French and Creole. Beginning with Spanish in 2006, DebtHelper added more languages in 2008. These services are absolutely essential to insure non english-speaking borrowers are making are informed financial decision. In the last decade banks have made a concerted effort to reach underserved borrowers with ads in their language. Yet these efforts often fell short when no translation services were provided for disclosures and counseling. For the Home Equity Conversion Mortgage Program (HECM) to effectively grow we must effectively serve our foreign language speaking prospective borrowers in all aspects.

Confusion in Every Language?
Exploring financial objectives, loan particulars and personal finances requires an in-depth and detailed conversation. Language barriers aside, financial products like reverse mortgages have their own vocabulary where confusion can abound. I experienced this first hand six years ago when I spoke with the Spanish-speaking daughter of a potential borrower on the phone and agreed upon a time for a meeting in her parent’s home. I arrived just after dinner that evening and began my presentation with the daughter translating. Four hours and two cups of coffee later, I was enlightened to the need to match prospective borrowers with loan officers and counselors fluent in their language “We are talking about a huge life changing financial decision here, without the counseling in their own language, the probability of having these homeowners having the perfect understanding of this program is significantly reduced. There are many technical terms that make more sense in one’s own language,” said Claudia Fehribach, Total Quality & HECM Manager at DebtHelper.

Contract law in the United States generally provides that a person who signs a contract without knowing its contents will be bound by the terms and ignorance will not relieve them of their obligation except in cases of fraud or misrepresentation. Federal disclosures, like the Truth in Lending Act (TILA) or the Good Faith Estimate (GFE), are undermined and can be rendered useless with language barriers. Transparency in the lending process requires understanding. That transparency must be matched with advertising, counseling and disclosures in the borrower’s native language.

An Unreached & Untapped Market
After years of declining loan volume due to the housing collapse, reverse mortgage lenders and loan officers are looking for creative ways to gain marketshare. Making inroads with Realtors for HECM purchase transactions and building relationships with financial planners is just the beginning. But are we overlooking an even larger market while focusing on unique applications of the HECM? By the year 2020, the Asian American population is projected to grow by 94% and the Hispanic by 111%. Our industry has a tremendous opportunity to both reach underserved markets while increasing our overall marketshare. When asked about the non-english speaking market Fehribach said, “It’s an almost untouched market. We direct our effort to the Spanish community (which is huge), but we overlook the potential of other communities that could be taking the benefits of a HECM in their senior years.”

To address this growing need DebtHelper has plans to expand counseling services for Vietnamese, Russian and Chinese. According to the agency most Portuguese counseling requests originate from Florida and New York / New Jersey and Massachusetts. In fact a new counseling center was opened in Boston to better serve the Portuguese speaking population.

Coupled with counseling is the need for more foreign speaking reverse mortgage loan officers. These uniquely skilled individuals are well suited in reaching foreign-speaking communities who may have never heard of the reverse mortgage program. Equipped with a cultural understanding and fluency in the language these professionals would begin to serve a motivated and accepting audience.

Reverse mortgages are truly a world product. India, China, Australia and Germany all have similar programs to name a few. More importantly we have several untapped foreign speaking markets within our own borders. Bilingual reverse mortgage professionals have a tremendous opportunity to reach specific markets with little competition. The demographic trends show massive increases in non-english speaking populations, many who are homeowners. Perhaps we will see the emergence of national lenders specializing in specific non-English speaking markets bridging the gap for future borrowers. After all, success requires both identifying and meeting consumer need. Counseling agencies have begun making inroads, now it’s our turn.

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Comprehensive Reverse Mortgage Changes Anticipated in 2013

We have been hearing about changes coming to the reverse mortgage industry for 2013 and industry experts say ” This time it’s for real” I actually wrote about the financial assessment changes back in January 2012 titled “Changes on the Horizon for Seniors Seeking a Reverse Mortgage”

Before exiting the reverse mortgage industry Met-Life actually implemented a financial assessment which reduced the borrowers who qualified and slowed the loan process – they eventually stopped the assessment and as we know eventually exited the industry altogether. Hopefully HUD and FHA can come up with a plan that does not stall reverse mortgages and at the same time stabilizes the plan so that it will benefit seniors enough to still have an interest in the reverse mortgage loan option.

So what is the financial assessment exactly and why now? Primary purpose according to HUD and the review by the Consumer Protection Bureau (CFPB) is to prevent reverse mortgage loan defaults many of which were a result of borrowers failing to maintain the property condition, property taxes and home owners insurance. According to CFPB’s report an estimated 54,000 HUD insured reverse mortgage borrowers — or 9.4 percent- are in default for this reason. We have seen a drop in the FHA loan volume in recent years but according to the HUD actuarial review of the HECM Mutual Mortgage Insurance (MMI) fund to have an economic value of negative- $2,799 million at the end 0f 2012 mostly as a result of the following:

High number of reverse mortgage loans completed during the years of 2003-2008

Higher numbers of borrowers taking out reverse mortgages at younger ages 62-68

Borrowers are living longer and keeping the loans longer and resulting in loan balance exceeding home value.

More Homes being conveyed to FHA rather than sold – mostly due to economic conditions

Economic value stands basically for “cash available to the fund” The goal is to recover this fund through new endorsements, economic improvement’s, higher house appreciations and higher mortgage insurance premiums to bring it back to positive. The current approaches being reviewed for the 2013 changes include:

Limiting the amount borrowers can draw at closing- this could reduce or eliminate the Standard HECM – According to HUD 70% of borrowers take the lump sum standard HECM

Create a Financial Assessment that helps qualify borrowers and are income worthy to cover taxes and insurance- up until it changes loan approval has primarily been determined by the borrowers’ age and equity, and not having Federal Tax liens with little or no impact from credit or income

Establishing a Set aside or escrow for taxes and insurance to ensure they are paid in a timely manner- currently this is the biggest issue at hand for default

Disallow Non Borrowing Spouses on new loans going forward- Up until Jan 2013 a borrower could/can still precede with a reverse mortgage loan even if the other (spouse) borrower was too young to qualify While this may all seem like impending doom for reverse mortgage borrowers and the consultants that serve them, the real goal of HUD is to obtain the authority from Congress to better manage the reverse mortgage programs and prevent defaults and ensure the HECM programs long term viability for senior borrowers.

There will likely always be defaults it is imperative that we as reverse mortgage consultant and HECM counselors act as Fiduciaries and clearly educate and design a program around the client’s needs and explain the potential risk of taking out a lump sum reverse mortgage at an early age if they do not have other credit lines to or debts to extinguish. A reverse mortgage can be part of a smart financial planning strategy to make living at home and aging in place as they desire but only if used in a financially suitable and responsible way that the borrower won’t spend through the funds too quickly.

 

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A Risky Lifeline for the Elderly Is Costing Some Their Homes

As a requirement of reverse mortgage loans, a counseling session must be provided by a HUD approved housing counseling agency. The reverse mortgage counseling session prevents this type of problem from happening.

Debthelper.com is a HUD approved housing counseling agency that will inform you of everything you need to know before considering a reverse mortgage loan.

Call us now to make an appointment 1-800-920-2262 or HECMeducation@debthelper.com

The very loans that are supposed to help seniors stay in their homes are in many cases pushing them out.

Reverse mortgages, which allow homeowners 62 and older to borrow money against the value of their homes and not pay it back until they move out or die, have long been fraught with problems. But federal and state regulators are documenting new instances of abuse as smaller mortgage brokers, including former subprime lenders, flood the market after the recent exit of big banks and as defaults on the loans hit record rates.

hud

Some lenders are aggressively pitching loans to seniors who cannot afford the fees associated with them, not to mention the property taxes and maintenance. Others are wooing seniors with promises that the loans are free money that can be used to finance long-coveted cruises, without clearly explaining the risks. Some widows are facing eviction after they say they were pressured to keep their name off the deed without being told that they could be left facing foreclosure after their husbands died.

Now, as the vast baby boomer generation heads for retirement and more seniors grapple with dwindling savings, the newly minted Consumer Financial Protection Bureau is working on new rules that could mean better disclosure for consumers and stricter supervision of lenders. More than 775,000 of such loans are outstanding, according to the federal government.

Concerns about the multibillion-dollar reverse mortgage market echo those raised in the lead-up to the financial crisis when consumers were marketed loans — often carrying hidden risks — that they could not afford.

“There are many of the same red flags, including explosive growth and the fact that these loans are often peddled aggressively without regard to suitability,” said Lori Swanson, the Minnesota attorney general, who is working on reforming the reverse mortgage market.

Joan Serioux-Forde, 72, thought that she couldn’t feel more devastated after her husband, Christopher, died last year. Then, roughly a month after the funeral, she received a letter from Generation Mortgage, a reverse mortgage lender, informing her that unless she paid $293,000, she would lose her home in San Bernardino, Calif. Ms. Forde said she was never informed that if she wasn’t on the reverse mortgage deed, she would have virtually no right to stay in her home unless she bought it outright. “It’s a nightmare,” she said. Generation Mortgage declined to comment.

Although the numbers of reverse mortgages have declined in recent years, the rate of default is at a record high — roughly 9.4 percent of loans, according to the consumer protection bureau, up from around 2 percent a decade earlier. And borrowers are putting their nest eggs at risk by increasingly taking out the loans at younger ages and in lump sums, federal data and a recent bureau report show.

Peter H. Bell, president and chief executive of the National Reverse Mortgage Lenders Association, a trade group, said that he met with officials from the Department of Housing and Urban Development to begin hashing out a way for lenders to adopt a uniform standard to determine whether seniors can afford to take on the loans.

Used correctly, reverse mortgages can be a valuable tool for seniors to stay in their homes and gain access to money needed for retirement. Seniors who have built up equity in their homes can borrow against a percentage of that and take out a lump sum or a line of credit. The loan doesn’t have to be repaid until the homeowner moves out or dies, but borrowers still have to pay property taxes, maintenance and insurance.

Reverse mortgage lenders and brokers note that the loans are highly regulated and require potential borrowers to speak to a certified housing counselor about the potential pitfalls before taking out the loans. Mr. Bell adds that his trade group strictly monitors the advertising of its roughly 400 members to ensure that it is accurate.

Since the financial crisis, the reverse mortgage market has been in flux, dampened by a drop in property values, complaints about the loans and the recent departure of big lenders. Originations backed by the federal government peaked at about 115,000 in 2007 and totaled about 51,000 loans last year.

MetLife was the latest major player to exit the market, in April. That followed the departure last year of the two biggest reverse mortgage lenders, Bank of America and Wells Fargo, which cited falling housing prices and difficulty assessing borrowers’ ability to repay the loans.

Into the void left by the big banks have moved smaller mortgage brokers and lenders. Some of them steer seniors into expensive, risky loans with deceptive sales pitches and high-pressure tactics, according to regulators, housing counselors and elder-care advocates.

Mark S. Diamond, a former subprime mortgage broker in Chicago, who has been sued for fraud by the Federal Trade Commission and the Illinois attorney general, faces a federal lawsuit filed in June by seniors who claim that he sold them reverse mortgages and either pocketed their loan amounts or promised to put the proceeds toward home repairs that never materialized. A lawyer for Mr. Diamond did not return calls for comment. Some solicitations reviewed by the Consumer Financial Protection Bureau present reverse mortgages as “free money” or mistakenly tell seniors that they could never lose their home. One Maryland reverse mortgage lender tells seniors that they can put the proceeds toward a vacation: “Just because you’re retired doesn’t mean you don’t need a vacation every now and then.” Last year, the Massachusetts Commissioner of Banks issued cease-and-desist orders to a handful of reverse mortgage firms for operating without a license. In its advertising, one of those mortgage brokers falsely promised seniors “you won’t lose your home.”

Officials at the bureau, which issued a report on the industry in June, said they heard from a number of seniors who claimed that lenders encouraged them to make their older spouses the sole borrower on the loan. The brokers earn more money when they make larger loans with the older spouse as the only borrower.

Some surviving spouses complained that brokers told them they could be added later, but they were not. The bureau says those seniors are at greater risk of losing their homes. The complaints, according to elder-care advocates and federal officials, have been rising during the past year, although there are no exact numbers.

Linda McMahon, a 65-year-old widow, watched helplessly as the locks were changed on her home in St. Croix Falls, Wis., last month. She said that in 2005, when her husband was 82 and she was 58, a mortgage broker from Wells Fargo promised her that she could add her name to the mortgage once she turned 62. That never happened because that year, in 2009, she didn’t have time to deal with it as her husband’s health quickly deteriorated and he died from a heart condition, she said. Soon, she was unable to pay any of the property taxes and insurance. “I am devastated,” said Ms. McMahon, who is retired, living on Social Security income and now renting an apartment.

A spokeswoman for the bank declined to comment. Reverse mortgages also have troublesome incentive structures that might encourage brokers to steer seniors toward lump-sum loans, which carry a fixed interest rate, rather than a line of credit with a variable interest rate, the bureau found. In a lump sum arrangement, the interest charges are added each month, and over time the total debt owed can far surpass the original loan.

Brokers earn higher fees on these loans and even more money when they sell the loans into the secondary market, where they can get rates nearly double those for variable loans, according to rate sheets obtained by the consumer bureau.

Some 70 percent of reverse mortgages are taken in lump sums, up from 3 percent in 2008, according to the bureau. When seniors use the money to pay off other debts, especially right before retirement or early into it, that can leave them with scarce resources to pay their property taxes and insurance.

Ms. Forde, who lives in fear of losing her San Bernardino home, said she could not afford to save her house by paying the full $293,000 debt. Now, she said, she spends much of her day standing guard by the window. Her home is already in foreclosure proceedings. With a wavering voice, she said: “I have nowhere to go.”

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Will Bankruptcy Rescue Reverse Mortgage?

Dear Bankruptcy Adviser, My father recently passed away. He had a reverse mortgage on his home. I inherited the house when he passed away. The reverse mortgage company wants their money now that my father is gone. There is no way I can pay it. My father used almost all of the equity, and the lender wants the balance, but the house still has some equity. We have lived here for 45 years. Can I file bankruptcy if the house is in my name? — Elizabeth

Dear Elizabeth, I am sorry for your loss. I hope the loss of your father will not be compounded by the loss of your home of the past 45 years. Unfortunately, you are facing an uphill battle.

Many seniors take out reverse mortgage loans. And from what I understand about reverse mortgages, they are great for the current owner of the property — just not so great for the owner’s heirs. The purpose is to allow the owner to stay in his or her home without having to pay the mortgage (principal or interest), and the owner can take money out of the home to spend.

The loan is paid back only when the owner dies or sells the home. The lender takes the risk that the property value decreases or that the owner lives longer than anticipated.

In your case, your father passed away, and you want to keep the home. Your ability to keep the home is definitely in jeopardy because of the reverse mortgage. Once the bank learns that the homeowner has died, the heirs or those who inherit the home must act quickly. Unless your father’s spouse is still alive, was a co-borrower on the reverse mortgage loan and is living in the home, you have six to 12 months to complete one of the following three options.

Refinance the property. Try refinancing with the current lender or a new lender into a conventional loan. This will allow you to start repaying the current principal and interest.

Pay off the current loan. Obviously, this option will be very difficult or impossible for you, but it is still an option. If you are looking to try this, you could consider borrowing money from someone else in the family. Or, you could possibly borrow from a retirement account if it wouldn’t put your retirement in jeopardy.

Sell the property. The current loan balance may be less than the value of the property. So you would not want to compound the loss of the property with the loss of any equity. Six to 12 months is enough time to sell the house. The bank usually will give you the extra six months when trying to sell the property.

Bankruptcy is not an option to keep the house and eliminate the balance. If the lender has a valid lien against the home, bankruptcy will not wipe out that lien. However, there are many attorneys now filing lawsuits against lenders for poorly or illegally drafted loan documents. If this is the case with your lender, you might try this approach. While it won’t eliminate the loan, it might push the lender to work out a loan repayment or refinance. You would need to find a competent local attorney to review this option.

Finally, the bank cannot merely take back the property and kick you out the next day. It must still comply with the foreclosure laws in the state in which you reside. But you must act quickly. Six months can fly by, and the lender has no interest in waiting to recover its investment.

Bankrate’s content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by Bankrate’s Terms of Use.

 

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Take Counseling Seriously . . . Megan Thibos, CFPB

More red flags on reverse mortgages

By Mark Miller
CHICAGO | Fri Jul 6, 2012 1:04pm EDT
(Reuters) – Consumer advocates, government regulators and watchdogs have been warning seniors for several years about the risks associated with reverse mortgages. Now, the red flags are being hoisted significantly higher.

The new federal Consumer Financial Protection Bureau (CFPB) has issued a report signaling a likely tightening of regulations for reverse loans. Regulation of all mortgages was transferred to the CFPB under the Dodd-Frank reform law. Congress also instructed the agency to produce a detailed study on the reverse loan market – and to issue new regulations if its research uncovered unfair, deceptive or abusive practices.

The CFPB’s report confirms earlier warnings that reverse mortgages have become an increasingly risky business for borrowers and would-be borrowers. A growing number of borrowers are taking on reverse mortgage loans at younger ages in return for large lump payouts that carry high fixed rates of interest. And a growing percentage of outstanding loans are at risk of default.

While it is clear CFPB will be considering new regulations, the agency, and the industry, are taking steps to educate consumers on how to avoid problems with reverse loans.

“We’re going to continue to follow this, and work to get answers to our questions,” says Hubert H. (“Skip”) Humphrey III, who heads up CFPB’s Office of Older Americans.

CURRENT RULES

Reverse mortgages, available to homeowners over age 62, allow seniors to turn equity in their home into cash while staying in their homes. Unlike a forward mortgage, where you use income to pay down principal and increase equity, a reverse mortgage pays out the equity in your home as cash; your debt level rises and equity decreases.

The most popular loan type is the Home Equity Conversion Mortgage (HECM), which is administered and regulated by the U.S. Department of Housing and Urban Development, and insured by the Federal Housing Administration.

Repayment typically is triggered when a homeowner dies or moves out permanently, and is typically funded through sale of the home. If the balance on a HECM is higher than the value of the home, the FHA makes up the difference.

While reverse mortgages offer seniors in need a useful way to tap home equity, the CFPB found that reverse loans are too complex for most seniors to understand. Many struggle to understand the rising balance/falling equity structure of the loans, or do not understand that reverse mortgages really are loans.

“Many aspects of a reverse mortgage do seem counterintuitive, says Peter Bell, president of the National Reverse Mortgage Lenders Association. “They are not fully understood. The NRMLA recently launched its own consumer education campaign (link.reuters.com/tux29s) and the CFPB has published a free brochure that offers consumers a basic checklist of issues to consider (link.reuters.com/vux29s).”

Another problem is the plunging age of borrowers. Nearly half of borrowers in 2011 were under age 70, with many using proceeds to pay off traditional mortgages rather than to meet current expenses. That can leave borrowers without options if later financial problems exhaust their other assets.

Moreover, 70 percent of borrowers are taking large lump sum payments at fixed interest rates rather than more flexible lines of credit at adjustable rates. In the traditional forward mortgage market, adjustable rate loans often are perceived as the more risky choice, but the opposite often is true with reverse mortgages.

Fixed-rate loans pay an upfront lump sum of the full mortgage amount, which means they rack up much higher interest costs and deplete borrowers’ equity far more rapidly.

HUD data shows that 9.4 percent of outstanding reverse loans are in danger of default for failure to pay taxes and insurance, a figure that is on the rise.

“The lump sum loan leaves you with no flexibility or cushion,” says Megan Thibos, a policy analyst in CFPB’s mortgage markets group and principal author of the report. “If you take an adjustable rate line of credit and fail to pay your taxes or insurance, the lender can process a payment from your line of credit. “But that’s not possible if you’ve taken it all upfront,” she says.

The report raises questions that could set the stage for new regulations of the industry by the agency. But in the meantime, here are key takeaways for any older American considering a reverse loan:

PROCEED WITH CAUTION

“Be sure you really understand what you’re getting into before signing any papers,” says Thibos, who urges seniors to be especially cautious about any loan that changes the title to the home.

Seniors sometimes choose to remove one spouse from the property’s title to get a reverse loan, particularly if only one spouse has reached the qualifying age of 62. In other cases, it allows an older spouse to qualify for a higher loan amount, since loan amounts are tied to the borrower’s age.

“That’s very risky,” Thibos says. “If the older spouse passes away or vacates the property to enter a nursing home, the younger spouse can lose the home.”

“Don’t believe everything you hear,” adds Norma Garcia, senior attorney at Consumers Union. “Talk with an elder-law attorney, a financial planner or an accountant.”

TAKE COUNSELING SERIOUSLY

Seniors must undergo counseling from HUD-approved advisers before loans can be issued, but many do not take it seriously. “Many seniors see counseling as a speed bump on the way to a goal, rather than a chance to really learn about what they are getting into,” Thibos says. “We want to urge seniors to take it seriously.”

WAIT TO A LATER AGE

Many younger borrowers are using reverse loans to retire an existing forward mortgage. While getting rid of a mortgage payment is appealing, it is a step that consumes most of the equity you’ve built up in your home, and leaves you with accruing interest and fees. Options to consider include downsizing to a less expensive home, or working longer.

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http://www.reuters.com/article/2012/07/06/us-column-miller-mortgages-idUSBRE8650S020120706

(Editing by Beth Pinsker Gladstone and Steve Orlofsky)

Children Not Entitled to Home Inheritance

NBC Today Show on Reverse Mortgages: Children Not Entitled to Home Inheritance
March 22nd, 2012 | by Elizabeth Ecker Published in News, Reverse Mortgage | 10 Comments

A reverse mortgage is for the borrower, not the borrower’s children, says a Today Show segment this week in response to a reverse mortgage inquiry. In responding to a viewer question from a woman whose mother recently took out a reverse mortgage and wonders if she can now get out of the loan to maintain an inheritance from the home, Today’s financial experts including Jean Chatzky and Sharon Epperson say that it is up to the borrower, not the children or family members.

Visit msnbc.com for breaking news, world news, and news about the economy
“My now-72-year-old mother took a reverse mortgage loan…” the viewer says, “and she now realizes she will be losing her home after she either can’t live there anymore or passes away, leaving her children without an inheritance.”

Chatzky reminds the viewer that her mother received counseling as a part of the loan process, ensuring she understood the consequences.

“When she took it out, she went through counseling. She knew what she was doing because you are mandated to go through counseling before you go through with [the loan],” Chatzky says. Further, though, the experts remind the viewer that she is not entitled to an inheritance from her mother’s estate.

“I have a problem with this notion that [the borrower] owes her daughter an inheritance,” Chatzky says.

“The reverse mortgage is for the parents, the person who takes it out. Not the child,” Epperson adds.

Written by Elizabeth Ecker

CFPB Begins Collecting Reverse Mortgage Complaints, Will Take Action

The Consumer Financial Protection Bureau has begun collecting and fielding mortgage complaints from borrowers, including those with reverse mortgages, the Bureau has announced via its official blog. Officials have said this information will be used to guide rule making in the future when it comes to mortgage products.

So far, the bureau has a similar collection under way for credit card complaints, which it began in July following the bureau’s official launch.

“While we’ve only been able to accept complaints on credit cards right now, we’ll begin taking complaints and inquiries related to home mortgages on or about Dec. 1,” a blog post containing a report from the CFPB’s first three months of collecting credit card data stated. The complaint portal is now open.

Visitors to the bureau’s website can click a tab allowing them to file a mortgage complaint by filling out a form that asks what the issue is, how it’s related to the mortgage process, and what the desired resolution is.

Reverse mortgages are included under types of mortgages, along with VA mortgages, FHA mortgages, and home equity lines of credit.

The blog post on credit card complaints asks for readers’ help as they develop their policies. And while its top priority is to help consumers resolve their problems, the CFPB says it also wants to be transparent about its systems, operations, and information that it’s receiving.

“We propose providing a searchable public database that contains various data fields for each complaint, but excludes any fields with personal information,” it reads, going on to ask for consumer feedback on the policy.

Check out the CFPB’s mortgage complaint form.

Written by Alyssa Gerace

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MetLife Sticks With Reverse Mortgages

October 13th, 2011
by Elizabeth Ecker Published in MetLife, News, Reverse Mortgage

The decision by MetLife to sell its forward mortgage operations came as a surprise to the reverse mortgage world as many wondered following the exits of Bank of America and Wells Fargo from the business, whether MetLife would be the next shoe to drop.

Not, so, say analysts following the decision announced Thursday, that MetLife would put its forward home mortgage loan business up for sale.
The decision came several months after MetLife said it was seeking a buyer for its bank, a move which it pursued due to increased regulation, it said at the time.

Upon the announcement regarding its “forward” mortgage business, the global insurance company said it would continue its reverse operations. While it didn’t specify as to the operational differences between the forward and reverse business channels, its statement expressed commitment to the business of which it now occupies the No. 1 spot. Analysts agree that MetLife is positioned to continue to gain from its reverse mortgage operations while the forward side of the business makes less sense for an insurance company.

“MetLife thinks that reverse mortgages are going to be an important instrument with regard to income distribution,” says Steven Schwartz, an analyst for Raymond James & Associates who follows MetLife. “That is an area that MetLife and many, many life insurers are targeting and see a big opportunity in helping people see that retirement funds they’ve built will last a lifetime.”

The reverse mortgage business and its alignment with MetLife’s broader insurance products is what makes MetLife different from the other reverse mortgage lenders that exited the business this year, with product mix being an essential component.

“The common thread between B of A, Financial Freedom, Wells Fargo, and now the Metlife announcement is that each is choosing to pare back ‘ancillary’ lines of business in favor of focusing on their core opportunities,” says John Lunde, co-founder and president of Reverse Market Insight. “For the first three, that meant banks keeping forward and getting out of reverse. Metlife, as an insurance company, is getting rid of its bank and forward while keeping reverse.”

For now, that means sticking with reverse mortgage products.

“I view that as validation of a viewpoint many of us have made over the years: reverse mortgages are less like forward mortgages than they are like life insurance,” Lunde says. “At least so far, Metlife seems to agree with that sentiment.”

It is an area where MetLift wants to continue doing business, Schwartz says. ”Lifetime income is an area where the life insurance industry is very well suited.”

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Does FHA Have Any Reverse Mortgage Surprises in Store for October?

by John Yedinak Published in News, Reverse Mortgage

As the reverse mortgage industry approaches the Department of Housing and Urban Development’s fiscal year-end, participants are anxiously waiting to see if there are any surprises to kick off the new year starting October 1.

Around the same time last year, HUD announced it was raising the annual insurance premium charged to borrowers and reducing the amount of money they can receive from the Federal Housing Administration’s Home Equity Conversion Mortgage (HECM). All of the changes were expected, except for one surprise—the decision to lower the effective interest rate floor from 5.50% to 5.00%.

Even with the principal limit reductions, many borrowers started to receive more money because of the lower floor and low interest rates.

The change was welcomed by most originators and borrowers, but it shocked investors and put significant pressure on the prices they were willing to pay for Ginnie Mae’s HMBS product. Investors feared there could be a refinance rally as a result of the unexpected change, which sent pricing for the assets into a tailspin.

Over time, pricing improved, but it taught investors—who were still relatively new to the industry—that October often brings changes to the HECM program. This year, the industry isn’t expecting any significant changes, but investors are watching closely.

“It is certainly something I am concerned about,” said Jeff Traister, managing director for Cantor Fitzgerald when asked about the changes from last year. ”They only change I anticipate with any degree of confidence is some announcement surrounding financial assessment. But considering the surprise dropped on the market last year, nothing would shock me.”

The same sentiment was expressed by other investors when Torrey Larsen, CEO of Security One Lending, recently spent a week in New York meeting with different firms involved in the business.

“[Investors] are concerned about whether FHA drops any bombs,” he said during an interview. It’s nothing new, but the anxiety was heightened after the changes in the floor last year. “Every October they’re holding their breath a bit,” Larsen said.

While a spokesperson from HUD said the agency doesn’t have any changes scheduled, no one had any idea the floor was being lowered last year either.

The other topic on some investors’ minds was the upcoming financial assessment, Larsen said.

“We need to get the financial assessment right, with the industry taking the lead,” he said. Investors are very familiar with underwriting from the “forward” business, but they’re trying to understand how it will work with the HECM. The details are still being developed, but they’re looking for some guidance on what it will look like.

“[Investors] know that it’s coming and the reasons behind it,” he said. “They’re just looking for a bit of clarity.”

Even if there are some unexpected changes announced by HUD in the coming weeks, Traister said he is confident everything will work out in the end. Normalcy prevailed, despite the initial craziness of the changes,.

“It just wasn’t exactly a barrel of laughs getting back to normal,” said Traister.

Source

Get Your Wells Fargo Refund!!!

Consumer Action wants to alert homeowners that the Federal Reserve has finedWells Fargo $85 million for allegedly steering homeowners into subprime loans when they would have qualified for prime loans at lower interest rates.

The Fed also accuses Wells Fargo Financial of falsifying income information on mortgage applications to qualify borrowers for loans that they could not afford.

Homeowners who refinanced their homes and received cash back (also called a “cash-out” mortgage) between January 2006 and June 2008 will be re-evaluated by the bank to see if they were steered into higher priced loans.

Borrowers with “cash-out” refinanced mortgages between January 2004 and June 2008 will receive notice from Wells Fargo if there is evidence that a homeowner’s income was falsified without their knowledge.

Estimates are that each eligible borrower will receive between $1,000 and $20,000 in compensation. The Federal Reserve believes that more than 10,000 homeowners may be eligible for settlement funds.

The $85 million penalty is the largest fine the Federal Reserve has issued in a consumer protection case. The bank must change its oversight and employee compensation policies. Wells Fargo closed Wells Fargo Financial in July 2010.

For more information consumers should call Wells Fargo at 877-546-0090.