A report from the Federal Housing Administration shows the Mutual Mortgage Insurance Fund is performing better than previous projections by independent auditors which said total capital resources would decline by approximately $5 billion.
According to FHA's fourth quarter report to congress, the total capital resources in the MMI fund increased slightly to $33.3 billion during the quarter and by $1.5 billion for all of fiscal year 2010.
Insurance activity for the FHA's reverse mortgage program increased to 18,484 units during the quarter, up from 15,266 reverse mortgages. Fiscal year endorsements came in at 78,757, 31 percent lower than fiscal year 2009.
"The decline in FY 2010 followed reductions in equity take-out limits that went into effect for new loan applications effective in October 2009," said FHA in the report. "Forecasts of lower levels of house price growth in the longer-term, compared to previous projections, requires HUD to again make changes to assure that HECM does not require taxpayer subsidies."
For fiscal year 2011, HUD increased the annual mortgage insurance premium for the HECM Standard from 0.50 percent to 1.25 percent. The agency also introduced the a new low cost reverse mortgage product in October. "With HECM Saver, the maximum equity take-out limit is considerably lower than it is with the HECM Standard option, which lowers the risk to the MMI Fund," said FHA.
According to the report, current regulations require that some positive upfront premium be charged for HECM loans, which is why there is the .01% upfront premium for the HECM Saver.
During the quarter, the credit subsidy rate for the HECM program remained at -0.50%. Loans with negative credit subsidies are expected to produce receipts for the Federal budget.
While the announcement was welcome news, Tozer failed to bring the most important piece of information, the new net worth requirements.
Earlier during the conference, Michael Nardacci, Director of Ginnie Mae, said the agency plans to release the details by year end.
"We really are taking our time to get it right, please bear with us as we try to get this correct," Nardacci said. "In terms of the HMBS market, it’s very expensive and issuers need to be very well capitalized to serve the product."
Ginnie Mae is the only source of liquidity for reverse mortgage lenders after Fannie Mae announced it would no longer purchase reverse mortgages (HECM) in October. While the HMBS program has grown from $1.357 billion in 2008 to $8.538 billion in 2009, overall, the product is “under 2% of what GNMA does” said Nardacci.
There are currently 10 approved HMBS issuers but others like Urban Financial – backed by Knight Capital Group – have been very public about their desire to get approved. Industry sources tell RMD the new net worth requirements will be raised dramatically, north of $10 million to ensure issuers can meet draw requirements.
The New York Times published a special report about the Sandwich Generation and the choices they face when parents pensions and social security benefits don't cover their living costs and other care.
As grim as it sounds, things are not hopeless for the sandwich generation. True, some products from the financial industry, like long-term care insurance, have not become the cure-all protection that many people had hoped. But other products, like reverse mortgages and longevity insurance, show promise.
The report discusses reverse mortgages between family members as one way to raise cash from less usual places as well as planning for long term care.
The “sandwich generation”, defined as those who are responsible for supporting both their children and parents is a group that Jeff Lewis, Chairman of Generation Mortgage has been discussing more frequently. A recent survey of the company conducted found 78 percent of those polled are worried about having enough money to retire comfortably.
“The Sandwich Generation is probably the most financially vulnerable demographic to result from the recession," said Lewis. "They are unemployed or under-employed, financially supporting two generations in their family and are saddled with debt from bills and a mortgage. As this group looks to retire, their financial situation, coupled with the state of the economy, is not leaving them with many options."
Check out the New York Times special section at the link below.
Pending home sales retreated after two monthly gains, signaling an uneven recovery entering 2011 with some near-term disruptions from the foreclosure moratorium, according to the National Association of Realtors
The index slipped 1.8 percent to 80.9 based on contracts signed in September from an upwardly revised 82.4 in August. However, the index remains 24.9 percent below a surge to 107.8 in September 2009 when first-time buyers were jumping into the market to take advantage of the initial deadline for the tax credit last November.
The data reflects contracts and not closings, which normally occur with a lag time of one or two months.
"Existing-home sales have shown some improvement but the foreclosure moratorium is likely to cause some disruption and contribute to an uneven sales performance in the months ahead," said Lawrence Yun, NAR chief economist. "Nonetheless, there appears to be a pent-up demand that eventually will be unleashed as banks resolve their issues with foreclosures and the labor market improves. However, tight credit and appraisals coming in below a negotiated price continue to constrain the market."
The PHSI in the Northeast slipped 1.7 percent to 59.6 in September and is 28.3 percent below a year ago. In the Midwest the index fell 5.7 percent in September to 64.2 and remains 33.0 percent below September 2009. Pending home sales in the South declined 3.5 percent to an index of 87.6 and are 19.1 percent below a year ago. In the West the index rose 3.5 percent to 104.6 but is 24.7 percent below September 2009.
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